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Mastercard Up 11.6% YTD: Is It Worth Buying the Stock Right Now?
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Mastercard Incorporated (MA - Free Report) stock gained 11.6% in the year-to-date period compared with the industry’s 7.3% rise and the broader sector’s rally of 7.5%. However, it underperformed the S&P 500 Index’s rise of 13.3%. MA is trading above its 50-day and 200-day moving averages, indicating solid upward momentum.
The company’s increasing cross-border volumes, coupled with resilient consumer spending and diversification with value-added services, have been supporting the stock. Strong purchase volume growth in Europe and Latin America poises the company well for growth.
YTD Price Performance
Image Source: Zacks Investment Research
MA’s Growth Drivers
MA’s diversified business model, both in terms of operations and geography, will continue to benefit the company. Its value-added services and solutions contributed 37.7% to total revenues in the first half of 2024, up from 37% in 2023. Moreover, its purchase transactions are geographically diversified, with Europe accounting for 38.6% of the total number, followed by the United States, Latin America and Canada. MA is continuing to grow its footprint in CEMEA, Latin America and Asia Pacific, aiming to participate in the secular shift to digital forms of payment from cash.
Mastercard has strategically leveraged acquisitions and partnerships to expand market reach and enhance product offerings. These partnerships and acquisitions underscore its commitment to innovation and global growth. MA recently announced some organizational changes to accelerate growth in both its segments. It aims to redeploy its resources in markets with high levels of cash and enhance its value-added services by leveraging artificial intelligence.
MA is also enhancing the online checkout experience through tokenization, Click-to-Pay and Payment passkeys. It expects to phase out manual card entry to bring in one-click checkout for e-commerce payments in Europe by 2030. It also aims to enhance the in-store checkout experience with Biometrics. Moves like these are expected to drive transaction volumes and enhance user’s trust in MA’s secure payment network.
The company's revenue trajectory reflects sustained growth, driven by consumer spending and robust card usage worldwide. Its digital initiatives position Mastercard for continued revenue expansion. MA’s improved net revenue guidance underscores its confidence in its strategic initiatives and its ability to navigate the economic landscape effectively.
MA’s Capital Deployment Update
With a strong cash position and consistent cash flow generation, Mastercard remains well-positioned for strategic investments, including share buybacks and dividends. This financial strength supports its growth initiatives and underscores its commitment to enhancing shareholder value.
Mastercard bought back 10.2 million common shares in the first half of 2024 and another 1.9 million shares in the quarter-to-date period through July 26. The company paid dividends worth $1.2 billion in the first half of 2024. With continued strength in its earnings and cash flow growth, MA is expected to continue carrying out shareholder value-enhancing initiatives.
Estimate Revision Favoring MA Stock
MA’s 2024 earnings have witnessed an upward estimate revision during the past 60 days. The Zacks Consensus Estimate for current-year adjusted earnings for MA is currently pegged at $14.29 per share, indicating 16.6% year-over-year growth. The consensus mark for 2025 indicates a further 15.9% jump. MA beat earnings estimates in each of the past four quarters, the average surprise being 3.5%.
Image Source: Zacks Investment Research
MA Stock Returns Higher Than the Industry
MA's trailing 12-month return on assets (ROA) is 30.2%, ahead of the industry average of 14.6%. ROA is a financial ratio that measures how well a company uses its assets to generate profit. The current ROA of the company indicates that it is using its assets more efficiently than its peers.
Image Source: Zacks Investment Research
MA’s Risks
Mastercard’s business might face some regulatory obstacles, which can negatively impact its future growth rate. Ongoing and potential legal battles, including some lawsuits, could lead to financial liabilities and increased competition.
The Credit Card Competition Act of 2023 also aims to induce competition in the credit card network, which might impact the margins of Mastercard. Higher competition would also imply lowering margins to survive in the market. However, rising demand for security in cashless transactions and better rewards might result in higher costs. This might impact the bottom line in the future.
Mastercard, being a payments company, is directly impacted by transaction volumes and the overall financial health of a consumer. Although the consumer spending levels were resilient in the recent quarters, a future decline in consumer spending growth is expected to lower transaction growth volumes. This can affect MA’s top line.
Is Mastercard Stock Overvalued?
From a valuation perspective, Mastercard appears relatively expensive, which may constrain short-term gains and make it less appealing compared to other investment opportunities. Going by its price/earnings ratio, the company is trading at forward earnings multiple of 30.02X, higher than the industry’s average of 22.33X.
In comparison, its peers, American Express Company (AXP - Free Report) and Visa Inc. (V - Free Report) , are trading cheaper at 17.01X and 25.36X, respectively.
Image Source: Zacks Investment Research
Final Thoughts: Hold Onto MA Stock
Mastercard’s improved 2024 guidance and continued growth in payment volumes make it an attractive stock to retain for investors. The ongoing secular shift toward digital payments in regions like CEMEA, Latin America and Europe is expected to expand MA’s network. Moreover, expanding value-added services and solutions business also adds to its positives.
However, it currently faces regulatory risks, which investors should keep an eye on. The company’s valuation is higher compared with the industry’s average. These factors suggest that it might not be a good time to buy this stock and wait for a better entry point.
Image: Bigstock
Mastercard Up 11.6% YTD: Is It Worth Buying the Stock Right Now?
Mastercard Incorporated (MA - Free Report) stock gained 11.6% in the year-to-date period compared with the industry’s 7.3% rise and the broader sector’s rally of 7.5%. However, it underperformed the S&P 500 Index’s rise of 13.3%. MA is trading above its 50-day and 200-day moving averages, indicating solid upward momentum.
The company’s increasing cross-border volumes, coupled with resilient consumer spending and diversification with value-added services, have been supporting the stock. Strong purchase volume growth in Europe and Latin America poises the company well for growth.
YTD Price Performance
Image Source: Zacks Investment Research
MA’s Growth Drivers
MA’s diversified business model, both in terms of operations and geography, will continue to benefit the company. Its value-added services and solutions contributed 37.7% to total revenues in the first half of 2024, up from 37% in 2023. Moreover, its purchase transactions are geographically diversified, with Europe accounting for 38.6% of the total number, followed by the United States, Latin America and Canada. MA is continuing to grow its footprint in CEMEA, Latin America and Asia Pacific, aiming to participate in the secular shift to digital forms of payment from cash.
Mastercard has strategically leveraged acquisitions and partnerships to expand market reach and enhance product offerings. These partnerships and acquisitions underscore its commitment to innovation and global growth. MA recently announced some organizational changes to accelerate growth in both its segments. It aims to redeploy its resources in markets with high levels of cash and enhance its value-added services by leveraging artificial intelligence.
MA is also enhancing the online checkout experience through tokenization, Click-to-Pay and Payment passkeys. It expects to phase out manual card entry to bring in one-click checkout for e-commerce payments in Europe by 2030. It also aims to enhance the in-store checkout experience with Biometrics. Moves like these are expected to drive transaction volumes and enhance user’s trust in MA’s secure payment network.
The company's revenue trajectory reflects sustained growth, driven by consumer spending and robust card usage worldwide. Its digital initiatives position Mastercard for continued revenue expansion. MA’s improved net revenue guidance underscores its confidence in its strategic initiatives and its ability to navigate the economic landscape effectively.
MA’s Capital Deployment Update
With a strong cash position and consistent cash flow generation, Mastercard remains well-positioned for strategic investments, including share buybacks and dividends. This financial strength supports its growth initiatives and underscores its commitment to enhancing shareholder value.
Mastercard bought back 10.2 million common shares in the first half of 2024 and another 1.9 million shares in the quarter-to-date period through July 26. The company paid dividends worth $1.2 billion in the first half of 2024. With continued strength in its earnings and cash flow growth, MA is expected to continue carrying out shareholder value-enhancing initiatives.
Estimate Revision Favoring MA Stock
MA’s 2024 earnings have witnessed an upward estimate revision during the past 60 days. The Zacks Consensus Estimate for current-year adjusted earnings for MA is currently pegged at $14.29 per share, indicating 16.6% year-over-year growth. The consensus mark for 2025 indicates a further 15.9% jump. MA beat earnings estimates in each of the past four quarters, the average surprise being 3.5%.
Image Source: Zacks Investment Research
MA Stock Returns Higher Than the Industry
MA's trailing 12-month return on assets (ROA) is 30.2%, ahead of the industry average of 14.6%. ROA is a financial ratio that measures how well a company uses its assets to generate profit. The current ROA of the company indicates that it is using its assets more efficiently than its peers.
Image Source: Zacks Investment Research
MA’s Risks
Mastercard’s business might face some regulatory obstacles, which can negatively impact its future growth rate. Ongoing and potential legal battles, including some lawsuits, could lead to financial liabilities and increased competition.
The Credit Card Competition Act of 2023 also aims to induce competition in the credit card network, which might impact the margins of Mastercard. Higher competition would also imply lowering margins to survive in the market. However, rising demand for security in cashless transactions and better rewards might result in higher costs. This might impact the bottom line in the future.
Mastercard, being a payments company, is directly impacted by transaction volumes and the overall financial health of a consumer. Although the consumer spending levels were resilient in the recent quarters, a future decline in consumer spending growth is expected to lower transaction growth volumes. This can affect MA’s top line.
Is Mastercard Stock Overvalued?
From a valuation perspective, Mastercard appears relatively expensive, which may constrain short-term gains and make it less appealing compared to other investment opportunities. Going by its price/earnings ratio, the company is trading at forward earnings multiple of 30.02X, higher than the industry’s average of 22.33X.
In comparison, its peers, American Express Company (AXP - Free Report) and Visa Inc. (V - Free Report) , are trading cheaper at 17.01X and 25.36X, respectively.
Image Source: Zacks Investment Research
Final Thoughts: Hold Onto MA Stock
Mastercard’s improved 2024 guidance and continued growth in payment volumes make it an attractive stock to retain for investors. The ongoing secular shift toward digital payments in regions like CEMEA, Latin America and Europe is expected to expand MA’s network. Moreover, expanding value-added services and solutions business also adds to its positives.
However, it currently faces regulatory risks, which investors should keep an eye on. The company’s valuation is higher compared with the industry’s average. These factors suggest that it might not be a good time to buy this stock and wait for a better entry point.
Mastercard currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.