Factors That Will Drive MasterCard’s Value In The Near Term

by Trefis Team
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American financial services company MasterCard (NYSE: MA) has had a good year so far. The stock has surged over 35% since the beginning of the year as the company continues to witness solid revenue growth backed by double digit growth in payments volume and processed transactions both in domestic and international markets. Further, the company’s focus on expanding its network of co-branding partners and improving technology to compete in the online payments segment has augmented its top-line as well as bottom-line. Accordingly, the company expects to deliver high-teen revenue growth for 2018. Below we discuss these key factors that will drive MasterCard’s value in the coming years.

We currently have a price estimate of $211 per share for MasterCard. View our interactive dashboard – MasterCard’s Price Estimate – and alter the key drivers such as revenue and earnings to visualize the impact on its valuation.

Strong Macro-Economic Environment 

Apart from factors such as seasonality, the payments industry is largely influenced by the health of the macroeconomic environment during a particular time period.  Of late, the global macroeconomic environment has been improving, allowing payments companies, such as MasterCard, to record digit digit volume growth over the last few quarters.

In the US, the economic growth has been improving, with low unemployment and healthy consumer confidence. Further, improving oil prices have instilled optimism in the Middle East and Africa region, augmenting spending growth. However, the political uncertainty in Mexico and Brazil, coupled with exchange rate volatility, has hampered volume growth in the Latin American region. Also, the impact of Brexit continues to weigh on retail sales and consumer confidence in the UK. Besides, trade tensions, and rising US interest rates, are negatively impacting the volumes in some Asian countries, including China and Korea.

That said, despite geopolitical and trade-related risks, MasterCard is optimistic about the global trading environment and expects to register double-digit volume and transaction growth in the coming quarters, which will boost its top-line growth in the near term.

Growing Network Of Co-Branding Partners

Over the quarters, MasterCard has witnessed a solid growth across its core products and services, driven by its efforts to expand its network of co-branding partners and deliver a differentiated portfolio of products and data and analytics capabilities. For instance, the company has won the L.L.Bean consumer credit program, and renewed its relationship with Hawaiian Air for both consumer and business co-brand cards. In addition, the company recently partnered with leading healthcare company, Anthem, and cemented a strategic relationship with JPMorgan Chase.

Further, the company’s partnerships with PayPal, Bank of America, Santander, and Banque Travelex, among others, should enable it to grow at a steady rate going forward. Driven by these strategic relationships, MasterCard expects to deliver high teen revenue growth in 2018 and beyond.

Product Enhancements

Apart from winning deals with leading corporate houses, MasterCard is also actively enhancing its product portfolio in order to drive its top-line growth. For instance, the company’s existing solution – Mastercard B2B Hub – that currently optimizes accounts payable payments for small and medium-sized businesses in the US, is now being expanded to offer similar automation capabilities to mid-sized and larger businesses. Further, the company launched its inControl solutions for commercial payments and business travel in Italy with Nexi to expand its presence in the new geography. We believe that the company’s efforts to enhance its product offerings are likely boost its top-line growth as well as valuation in the coming years.

Disagree with our forecasts? Create your own price estimate for MasterCard by changing the base inputs (blue dots) on our interactive dashboard.

 

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