Mastercard’s stock (NYSE: MA) has gained approximately 7% YTD as compared to the 8% rise in the S&P500 index over the same period. Further, at its current price of $373 per share, it is trading 13% below its fair value of $427 – Trefis’ estimate for Mastercard’s valuation. The company, a leading global payments solutions provider, outperformed the consensus estimates in the fourth quarter of 2022. It reported net revenues of $5.82 billion – up 12% y-o-y. The growth was driven by a 31% jump in the cross-border volume, followed by an 8% increase in the gross dollar volume (GDV) and an 8% rise in the switched transactions. On the cost front, the operating expenses increased by 10% in the quarter. Overall, the firm reported a 6% y-o-y improvement in the net income to $2.5 billion.
The total revenues grew 18% y-o-y to $22.2 billion in FY2022. It was driven by a 45% jump in cross-border volumes, followed by a 12% rise in gross-dollar volume and the number of switched transactions. That said, the positive effect of revenue growth was partially offset by an unfavorable decrease in total other income from $225 million to -$532 million. All in all, the net income increased 14% y-o-y to $9.9 billion.
Moving forward, we expect the revenue to continue its growth trajectory in Q1 2023. Notably, the consensus estimates for Q1 revenues and earnings are $5.64 billion and $2.71 respectively. Altogether, Mastercard’s revenues are forecast to touch $25.2 billion in FY2023. Additionally, MA’s adjusted net income margin is expected to see some improvement in the year, leading to a net income of $11.5 billion. This coupled with an annual EPS of $12.04 and a P/E multiple of just above 35x will lead to a valuation of $427.
|S&P 500 Return||1%||8%||85%|
|Trefis Multi-Strategy Portfolio||2%||10%||246%|
 Month-to-date and year-to-date as of 4/18/2023
 Cumulative total returns since the end of 2016