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Evaluating Mastercard's (MA) Growth Prospects: Hold or Fold?
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Mastercard Incorporated (MA - Free Report) is positioned for growth, propelled by strong consumer spending, an expanded services suite, increasing cross-border volume and overall transaction volume. Demonstrating its resilience and attractiveness to investors, the stock has gained 19.1% over the past year, outperforming the industry’s 18.5% growth. There’s more room to run.
Mastercard — with a market cap of $395.6 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.
Let’s delve deeper.
The Zacks Consensus Estimate for Mastercard’s 2023 full-year earnings is pegged at $12.16 per share, indicating a 14.2% rise from the year-ago reported figure. The estimate remained stable over the past week. For 2024, the estimate is pegged at $14.17 per share. MA’s earnings beat estimates in all the last four quarters, the average being 3.6%. This is depicted in the graph below.
Furthermore, the consensus mark for revenues is $25 billion for 2023, indicating a 12.4% rise from the year-ago reported figure. The consensus mark for 2024 is pegged at $28.1 billion. Increasing Cross-Border Assessments and Transaction Processing Assessments are set to support the top-line growth.
Our estimate for Cross-Border Assessments indicates a more than 27% year-over-year increase. Similarly, we expect Transaction Processing Assessments to jump 13.7% from the year-ago reported level. The growing transactions, GDV, prudent growth strategies and strategic partnerships are expected to enhance MA’s performance. Also, our model predicts a more than 10% year-over-year increase in Domestic Assessments.
Mastercard’s strategic focus on expanding operations in growing regions positions it well for sustained long-term growth. Its key alliances and partnerships are major contributors in this regard. Some important partnerships in recent times include those with Further Ventures, I&M Bank Uganda, First Atlantic Commerce, Bidvest Bank and many others.
It utilizes acquisitions to complement its organic initiatives and broaden its revenue base. This enables it to expand its addressable market size, drive new revenue streams and strengthen core product solutions. It helps the company to stay ahead of the growing competition within the payments space.
The company has been successfully generating cash flow from operations over the years, which enables it to execute share buybacks and dividend payouts. It generated cash flows from operations of $7.9 billion in the first nine months of 2023. It bought back 4.8 million shares for $1.9 billion and paid out dividends worth $538 million in the third quarter alone. Last month, it approved a 16% hike in the quarterly cash dividend and added $11 billion to its share buyback fund.
Key Concerns
However, there are a few factors that investors should keep an eye on.
For example, rising expenses, high rebates and incentives are likely to drag MA's margins. For full-year 2023, we expect adjusted operating expenses to escalate 10.5% year over year. Also, our model predicts rebates and incentives to grow nearly 22% year over year for 2023.
Its price-to-earnings for the forward 12 months of 34.4X is much higher than the industry average of 23.4X, making it overvalued. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.
The Zacks Consensus Estimate for RB Global’s 2023 full-year bottom line suggests 15.4% year-over-year growth. It has witnessed one upward estimate revision in the past 30 days against none in the opposite direction. RBA beat earnings estimates in each of the past four quarters, with an average surprise of 18.9%.
The Zacks Consensus Estimate for Repay Holdings’ 2023 full-year bottom line is pegged at 81 cents, which witnessed no estimate revisions in the past week. The consensus mark for full-year revenues indicates 4.3% year-over-year growth. RPAY beat earnings estimates in two of the past four quarters and missed twice, with an average surprise of 0.2%.
The Zacks Consensus Estimate for MoneyLion’s 2023 full-year earnings indicates a 58.4% year-over-year improvement. It has witnessed one upward estimate revision in the past 60 days against none in the opposite direction. The consensus mark for ML’s full-year revenues indicates a 24.4% year-over-year increase.
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Evaluating Mastercard's (MA) Growth Prospects: Hold or Fold?
Mastercard Incorporated (MA - Free Report) is positioned for growth, propelled by strong consumer spending, an expanded services suite, increasing cross-border volume and overall transaction volume. Demonstrating its resilience and attractiveness to investors, the stock has gained 19.1% over the past year, outperforming the industry’s 18.5% growth. There’s more room to run.
Mastercard — with a market cap of $395.6 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.
Let’s delve deeper.
The Zacks Consensus Estimate for Mastercard’s 2023 full-year earnings is pegged at $12.16 per share, indicating a 14.2% rise from the year-ago reported figure. The estimate remained stable over the past week. For 2024, the estimate is pegged at $14.17 per share. MA’s earnings beat estimates in all the last four quarters, the average being 3.6%. This is depicted in the graph below.
Mastercard Incorporated Price and EPS Surprise
Mastercard Incorporated price-eps-surprise | Mastercard Incorporated Quote
Furthermore, the consensus mark for revenues is $25 billion for 2023, indicating a 12.4% rise from the year-ago reported figure. The consensus mark for 2024 is pegged at $28.1 billion. Increasing Cross-Border Assessments and Transaction Processing Assessments are set to support the top-line growth.
Our estimate for Cross-Border Assessments indicates a more than 27% year-over-year increase. Similarly, we expect Transaction Processing Assessments to jump 13.7% from the year-ago reported level. The growing transactions, GDV, prudent growth strategies and strategic partnerships are expected to enhance MA’s performance. Also, our model predicts a more than 10% year-over-year increase in Domestic Assessments.
Mastercard’s strategic focus on expanding operations in growing regions positions it well for sustained long-term growth. Its key alliances and partnerships are major contributors in this regard. Some important partnerships in recent times include those with Further Ventures, I&M Bank Uganda, First Atlantic Commerce, Bidvest Bank and many others.
It utilizes acquisitions to complement its organic initiatives and broaden its revenue base. This enables it to expand its addressable market size, drive new revenue streams and strengthen core product solutions. It helps the company to stay ahead of the growing competition within the payments space.
The company has been successfully generating cash flow from operations over the years, which enables it to execute share buybacks and dividend payouts. It generated cash flows from operations of $7.9 billion in the first nine months of 2023. It bought back 4.8 million shares for $1.9 billion and paid out dividends worth $538 million in the third quarter alone. Last month, it approved a 16% hike in the quarterly cash dividend and added $11 billion to its share buyback fund.
Key Concerns
However, there are a few factors that investors should keep an eye on.
For example, rising expenses, high rebates and incentives are likely to drag MA's margins. For full-year 2023, we expect adjusted operating expenses to escalate 10.5% year over year. Also, our model predicts rebates and incentives to grow nearly 22% year over year for 2023.
Its price-to-earnings for the forward 12 months of 34.4X is much higher than the industry average of 23.4X, making it overvalued. Nevertheless, we believe that a systematic and strategic plan of action will drive its long-term growth.
Stocks to Consider
Some better-ranked stocks in the broader Business Services sector are RB Global, Inc. (RBA - Free Report) , Repay Holdings Corporation (RPAY - Free Report) and MoneyLion Inc. (ML - 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.
The Zacks Consensus Estimate for RB Global’s 2023 full-year bottom line suggests 15.4% year-over-year growth. It has witnessed one upward estimate revision in the past 30 days against none in the opposite direction. RBA beat earnings estimates in each of the past four quarters, with an average surprise of 18.9%.
The Zacks Consensus Estimate for Repay Holdings’ 2023 full-year bottom line is pegged at 81 cents, which witnessed no estimate revisions in the past week. The consensus mark for full-year revenues indicates 4.3% year-over-year growth. RPAY beat earnings estimates in two of the past four quarters and missed twice, with an average surprise of 0.2%.
The Zacks Consensus Estimate for MoneyLion’s 2023 full-year earnings indicates a 58.4% year-over-year improvement. It has witnessed one upward estimate revision in the past 60 days against none in the opposite direction. The consensus mark for ML’s full-year revenues indicates a 24.4% year-over-year increase.