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Why You Should Hold on to Mastercard (MA) Stock for Now

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Mastercard Incorporated (MA - Free Report) is well poised to grow on the back of strategic acquisitions, alliances and technology upgrades, along with product diversification and geographic expansion. Its massive cash flow generating ability bodes well. Also, rising demand for digital payment solutions is a huge positive.

Mastercard — with a market cap of $313.3 billion — is a leading global payment solutions company that provides an array of services in support of credit, debit, mobile, web-based and contactless payments, and other related electronic payment programs to financial institutions and other entities.

Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth holding on to at the moment.

Trend in Estimates

The Zacks Consensus Estimate for Mastercard’s 2022 earnings is pegged at $10.52 per share, indicating a 25.2% rise from the year-ago reported figure. MA has witnessed 12 upward revisions in the past 60 days against none in the opposite direction. MA’s earnings beat estimates in each of the last four quarters, the average being 14.2%.

Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated Price and EPS Surprise

Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote

Furthermore, the consensus mark for revenues is $22.2 billion for 2022, indicating a 17.3% rise from the year-ago reported figure.

Key Drivers

Mastercard’s growing footprint in the emerging economies is a major tailwind. MA’s focus on incorporating more and more people in the digital and contactless solutions paves the way for long-term growth. It foresees tremendous growth opportunities from its Southeast Asia and Latin America operations. Also, it is growing its presence in Eastern Europe, the Middle East and Africa through multiple alliances, partnerships and acquisitions.

The supply chains moving away from China created great opportunities for the Southeast Asian countries. The advantages of demographics and rapid digitization are playing major roles in accelerating growth in these regions. With its expanding footprint, Mastercard can witness ballooning revenues from this area.

Over the past few months, Mastercard has created and launched numerous tools to support small and medium-sized businesses and merchants, globally. These are likely to propel MA’s transaction volumes. MA is also focused on improving security of its network to provide secured transaction options, enabling client retention. Last month, MA introduced the attack simulation and assessment platform Cyber Front to bolster the cybersecurity capabilities of businesses and governments.

The ongoing recovery of the travel and tourism sector can be a major boon for Matercard. Mastercard Economics Institute’s analysis showed that at current rate, 1.5 billion more passengers will fly globally this year compared with the 2021 level. This trend can help boost MA’s payments, processed transactions and cross-border volumes. Last month, MA joined forces with India’s rapidly growing travel website Musafir to introduce cutting-edge payment products and solutions for enhancing travel bookings across the Middle East and North Africa regions.

Key Concerns

There are a few factors that are impeding the stock’s growth lately.

Increasing costs are eating into its profits. Higher expenses, high rebates and incentives might drag MA's margins. In 2021, operating expenses escalated 21.9% from the prior-year comparable period’s figure. The metric further jumped 13% year over year in the first quarter of 2022. Also, rising competition in the payment market is concerning. Emerging payment companies with significant growth potential are capturing markets at a faster rate. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.

Stokcs to Consider

Some better-ranked stocks in the businessservices space are Green Dot Corporation (GDOT - Free Report) , Paysafe Limited (PSFE - Free Report) and Accenture plc (ACN - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in Texas City, TX, Green Dot is a pro-consumer bank holding company and personal banking provider. The Zacks Consensus Estimate for GDOT’s 2022 earnings indicates an 8.6% increase from the prior-year reported number. Green Dot’s earnings beat estimates in three of the last four quarters and missed the mark once, the average surprise being 20.5%.

Based in London, Paysafe is a digital commerce solution provider for different types of businesses. The Zacks Consensus Estimate for PSFE’s second-quarter earnings indicates a 175% increase from the prior-year reported number.

Dublin, Ireland-based Accenture is a global consulting services provider, with extensive relationships with the world's leading companies. Accenture’s bottom line for 2022 is expected to rise 22.7% from the prior-year reported figure. The stock has witnessed one upward estimate revision in the past 30 days and no movement in the opposite direction. ACN’s earnings beat estimates in each of the last four quarters, the average being 5.5%.