Mastercard Incorporated MA stock gained 16.1% in the past six-month period compared with the industry’s 17.9% rise and the broader sector’s rally of 20.1%. The stock outperformed the S&P 500 Index’s rise of 13.3%. MA is also trading above its 50-day and 200-day moving averages, indicating solid upward momentum.
Strong cross-border volumes, resilient consumer spending, and MA’s diversification efforts should continue to aid the company’s results. Recently, the company released its long-term guidance and undertook several partnerships that might help MA solidify its leadership position in the payments network space. Before assessing whether to buy, hold, or sell the stock, let's have a look at recent developments and long-term growth prospects.
MA’s 6-Month Price Performance
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MA’s Robust 2025-2027 Outlook
Mastercard is projecting a high-end low-double-digit Compound Annual Growth Rate (CAGR) in net revenue and a mid-teens CAGR in Earnings Per Share (EPS) from 2025-2027. Moreover, it expects a high-teens net revenue CAGR for value-added services and solutions. These figures highlight the company's potential to maintain its strong financial performance???.
With an annual operating margin target of at least 55%, Mastercard demonstrates its ability to maintain profitability while investing for growth???. The company expects annual carded market volume growth to be around 9% for 2025-2027, excluding China.
Focus on the Chinese Market
Mastercard recognizes China as a significant market within its Serviceable Addressable Market for consumer payments, particularly in card-based transactions, given the well-established domestic networks. Despite the dominance of local players like UnionPay and mobile payment platforms such as Alipay and WeChat Pay, Mastercard sees opportunities to drive digital payment adoption, as cash and check usage still account for a substantial portion of transactions in parts of China.
However, the company faces regulatory restrictions limiting access to foreign payment networks. To navigate these challenges, Mastercard focuses on strategic collaborations with local banks, regulators, and payment providers while leveraging its global expertise in tokenization, cross-border payments, and value-added services to differentiate itself in the competitive market.
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 37.5% to total revenues in the first nine months of 2024, up from 37% in 2023. Moreover, its business is geographically diversified, with 34% of total GDV coming from North America, followed by 33% in Europe, 24% in the APMEA region and 9% in Latin America. MA continues to grow its footprint in CEMEA, Latin America and Asia Pacific, aiming to participate in the secular shift from cash to digital payment.
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 growthIt 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. The company also aims to enhance the in-store checkout experience with Biometrics. MA recently announced its partnership with Tap Payments to introduce the world’s first Click to Pay with Payment Passkey service. Moves like these are expected to drive transaction volumes and enhance user’s trust in MA’s secure payment network.
MA’s Capital Deployment Update
Mastercard bought back 16.5 million common shares in the first nine months of 2024 and another 2 million shares in the quarter-to-date period through Oct. 28. The company paid dividends worth $1.8 billion in the first nine months 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 $14.47 per share, indicating 18% year-over-year growth. The consensus mark for 2025 indicates a further 16.3% jump. MA beat earnings estimates in each of the past four quarters, the average surprise being 3.2%.
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MA Stock Returns Higher Than the Industry
MA's trailing 12-month return on assets (ROA) is 29.8%, ahead of the industry average of 14.5%. 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.
MA’s Risks
Mastercard’s business might face some regulatory obstacles, negatively impacting its future growth rate. Ongoing and potential legal battles, including some lawsuits, could lead to financial liabilities and increased competition. Reportedly, Mastercard has reached an agreement in principle to settle a UK collective lawsuit over card fees, brought on behalf of 46 million consumers, for approximately £200 million, pending tribunal approval.
Mastercard, a payments company, is directly impacted by transaction volumes and the overall financial health of a consumer. Although consumer spending levels were resilient in recent quarters, a future decline in consumer spending growth is expected to lower transaction growth volumes. This can affect MA’s top line.
MA Stock’s Valuation
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 32.28X, higher than the industry’s average of 25.68X.
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In comparison, its peers, American Express Company AXP and Visa Inc. V, are trading cheaper at 20.13X and 27.06X, respectively.
Conclusion
Mastercard’s robust long-term guidance, focus on the Chinese market, and continued growth in payment volumes make it an attractive stock for investors to retain. The ongoing secular shift toward digital 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.
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