Mastercard’s stock (NYSE: MA) has gained approximately 13% YTD as compared to the 16% rise in the S&P500 index over the same period. Further, at its current price of $394 per share, it is trading 7% below its fair value of $425 – Trefis’ estimate for Mastercard’s valuation. The company posted better-than-expected results in the first quarter of 2023. It reported an 11% increase in the net revenues to $5.75 billion driven by growth in gross-dollar volume (up 10%), cross-border volume (29%), and number of switched transactions (12%). That said, the positive impact of higher revenues was offset by an unfavorable increase in the operating costs and income tax expenses, leading to a 10% drop in the net income to $2.36 billion.
The company posted strong revenue growth in FY2022, thanks to a 45% jump in cross-border volumes due to the normalization of international travel post-Covid-19. Further, the gross-dollar volume (GDV) and the number of switched transactions, the other two key metrics, also improved in the year. On the flip side, other income decreased from $225 million to -$532 million, hurting the bottom line. Overall, the firm managed to post a 14% y-o-y increase in net income.
Moving forward, we expect the same trend to continue in Q2. Notably, the consensus estimates for Q2 revenues and earnings are $6.19 billion and $2.93 respectively. Altogether, Mastercard’s revenues are estimated to touch $25.23 billion in FY2023. Additionally, MA’s adjusted net income margin is expected to see a slight improvement in the year, leading to a net income of $11.6 billion. This coupled with an annual EPS of $12.17 and a P/E multiple of just below 35x will lead to a valuation of $425.
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|S&P 500 Return||0%||16%||99%|
|Trefis Multi-Strategy Portfolio||1%||20%||275%|
 Month-to-date and year-to-date as of 7/5/2023
 Cumulative total returns since the end of 2016