Why We Believe MasterCard Is Worth $150

February 21st, 2018 by Trefis Team
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MA: Mastercard logo
MA
Mastercard

MasterCard (NYSE: MA) has performed strongly over the past few years. Its revenue grew 18% and its stock price jumped 50% in 2017. The company remains focused on expanding its network of co-branding partners and improving technology to compete in the rapidly growing online payments segment. Credit card customers’ increasing demand for security and ease of use, and the company’s focus in this direction as it integrates the capabilities of NuData Security into its software suite, suggests an improved growth outlook. We expect MasterCard’s expenditures on sales and marketing, and client incentives to grow slower, and consequently drive operating margins.

Our price estimate for MasterCard’s stock stands at $150, which is below the market price. We have created an interactive dashboard which shows our forecasts and estimates for the company going forward; you can modify the key value drivers to see how they impact the company’s revenues, bottom line and valuation.

Expanding coverage and increased uptake of cards should drive transactions processed and revenues.

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Growth in international consumer spending and MasterCard’s international expansion should propel international transaction fees

Increased acceptance of MasterCards and growth in assessment fee should drive Assessment revenue.

We expect 11% growth in 2018 revenues due to a shift towards digital transactions and MasterCard’s leading position, while rebates should remain around current levels.

We expect absolute growth in expenses due to expanding coverage and technology enhancements. Meanwhile, substantial growth in revenue should drive EBITDA while corporate tax overhaul should drive net income.

We have used a P/E ratio of 33 for our valuation estimate, but you can modify the multiple in order to come up with your own valuation estimate for the company.

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