Where Is Mastercard Stock Headed?

MA: Mastercard logo

Mastercard’s stock (NYSE: MA) has gained approximately 14% YTD as compared to the 11% rise in the S&P500 index over the same period. Further, at its current price of $395 per share, it is trading 13% below its fair value of $453 – Trefis’ estimate for Mastercard’s valuation

Interestingly, Mastercard stock had a Sharpe Ratio of 0.9 since early 2017, which is higher than 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.24 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.

The company outperformed the consensus estimates in the second quarter of 2023. It reported a 14% increase in the net revenues to $6.3 billion driven by a 12% rise in the gross-dollar volume (GDV), a 24% jump in the cross-border volume, and a 17% growth in the number of switched transactions. Further, the operating expenses as a % of revenues witnessed a favorable drop, benefiting the bottom line. Overall, the net income improved 25% y-o-y to $2.8 billion.

Relevant Articles
  1. Mastercard Stock Gained 20% In The Last Six Months, What To Expect From Q1 Results?
  2. Up 36% Since The Start Of 2023, Where Is Mastercard Stock Headed?
  3. Where Is Mastercard Stock Headed?
  4. What To Expect From Mastercard Stock?
  5. Mastercard Stock Likely To Top The Earnings Consensus In Q4
  6. Is Mastercard Stock Fairly Priced?

The company’s top line grew 13% y-o-y to $12 billion in the first half of FY 2023. It was because of strong growth in each of the key metrics – GDV, cross-border volume, and number of switched transactions. In addition, lower operating expenses as a % of revenues also helped the bottom line. However, the positive effect was partially offset by higher effective income tax. Altogether, the net income increased 6% y-o-y to $5.2 billion.

Moving forward, we expect the third quarter results to be on similar lines. All in all, Mastercard’s revenues are estimated to touch $25.27 billion in FY2023. Additionally, MA’s adjusted net income margin is expected to improve in the year, leading to a net income of $13.9 billion. This coupled with an annual EPS of $14.58 and a P/E multiple of just above 31x will lead to a valuation of $453.

 Returns Sep 2023
MTD [1]
YTD [1]
Total [2]
 MA Return -4% 14% 296%
 S&P 500 Return -5% 11% 91%
 Trefis Reinforced Value Portfolio -7% 23% 531%

[1] Month-to-date and year-to-date as of 9/28/2023
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates