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Mastercard (MA) earnings: strong long-term sentiment, despite high valuation

1:38 pm ET, 29 Oct 2018

Mastercard Incorporated (MA) shares are trading at $193.77, down -2%. The company is announcing its quarterly earnings results on Tuesday before the market opens. What's driving Mastercard stock price? What's MA stock price forecast?

Mastercard is a technology company that provides transaction processing and other payment-related products and services globally. Lately, the stock has performed well: it generated a return of 35% in the past year. The investment firm Oppenheimer believes that strong retail sales should help the company generate solid quarterly results.

Investors are showing interest in the stock because of the company’s strong brand value in the payments market.  On the other hand, few bearish investors worry that the current P/E ratio is higher than the five-year average for the stock.  In the previous quarter, revenue rose 20% to $3.67 billion and earnings per share came at $1.66 compared to $1.10 for the same period last year.

Third-quarter results will be released before market open on October 30, 2018.  Analysts expect the company to earn $1.68 per share on revenue of $3.86 billion. The company beat analysts' estimates in the previous four quarters.

What is the sentiment towards the MA stock? Our technical analysis shows that:

  • The stock short-term sentiment (next 30 days) is trending negative;
  • The mid-term sentiment (3-6 months) is trending positive;
  • The long-term sentiment (9-12 months) is trending positive. 

Over the last month, Mastercard Incorporated (MA) returned -8.77%.

Mastercard Incorporated (MA) forward P/E ratio is 27.23, and it’s high compared to its industry peers’ P/E ratio.

Mastercard Incorporated (MA) average analyst price target ($228.47) is 12.86% above its current price ($202.43).

For the latest price and information on Mastercard Incorporated, please visit Finstead and search for "MA price" or "MA news".

Mastercard Incorporated (MA) Stock Guide

Updated at: 4:49 am ET, 18 Sep 2020

Before we start: if you're looking for MA stock price, you can quickly find it out by visiting Finny and typing "MA quote". If you're looking for a quick scoop on MA stock (chart, price target, market cap, news and buy or sell analysis), go to Finny and look for "MA". You'll get all this info in one place. Or you can just type "MA news" to get the latest stock news.

Looking to buy or sell Mastercard Incorporated (MA)? Interested in getting the full scoop on MA, including earnings and dividends, stock forecast, buy or sell analysis and key stats? If so, you came to the right place.

In this MA stock guide, we'll address key questions about MA, above and beyond what you can find on Yahoo Finance, Zacks, MarketWatch or Morningstar.

Here is what you'll be able to find in this guide:

Earnings and Dividends: earnings, earnings date, dividend rate and dividend yield;
Analyst Predictions: stock forecast and analyst ratings;
Analysis: Finny Score and buy or sell analysis;
Key Stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio, industry, sector, and number of employees.

And here is the list of questions we'll answer:
1. What are MA earnings?
2. What is MA dividend?
3. What is MA dividend yield?
4. What is MA stock forecast (i.e., prediction)?
5. MA buy or sell? What is MA Finny Score?
6. What are the reasons to buy MA? Why should I buy MA stock?
7. What are the reasons to sell MA? Why should I sell MA stock?
8. What are MA key stats: revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

So let's start. Scroll down to the question that interests you the most.

Earnings and Dividends

1. What are MA earnings?

MA trailing 12-month earnings per share (EPS) is $7.23.

2. What is MA dividend?

MA forward dividend is $1.60.

3. What is MA dividend yield?

MA forward dividend yield is 0.45%.

Analyst Predictions

4. What is MA stock forecast (i.e., prediction)?

Based on MA analyst price targets, MA stock forecast is $353.69 (for a year from now). That means the average analyst price target for MA stock is $353.69. The prediction is based on 39 analyst estimates.

The low price target for MA is $305.00, while the high price target is $415.00.

MA analyst rating is Buy.

Analysis

5. MA buy or sell? What is MA Finny Score?

#{finnyScore:22}Our quantitative analysis shows 2 reasons to buy and 7 reasons to sell MA, resulting in Finny Score of 22.

6. What are the reasons to buy MA? Why should I buy MA stock?

Here are the reasons to buy MA stock:

  • Mastercard is poised to benefit from powerful secular trends over the next decade, as economies outside the United States grow and the use of cash declines.
  • Payment data is valuable to marketing and advertising companies like Google, who can use this information to improve their own offerings to customers and merchants.
  • The company will be able to grow revenue significantly without taking on much in the way of additional costs.
  • Mastercard also remains focused on inorganic growth via acquisitions as part of its long-term growth strategy. Acquisitions added 2% each in 2014 and 2015 to the company’s revenues. Though the contribution of the same to top line was meager in 2016 these added 2% to revenues in 2017 and 25% in the first quarter of 2018.
  • Organic growth remained a key strength at Mastercard as evident by a revenue CAGR of 11% from 2012-2017. The same was up 31% in the first quarter of 2018. We believe that the company should retain its revenue momentum in the coming quarters on the back of its strong market position and attractive core business that continues to be driven by new deals, renewed agreements and expansion of service offerings.
  • International markets provide both growth and diversification benefits to Mastercard. A major part of the company's revenue is generated from international regions such as the Asia-Pacific, Canada, Europe, Latin America, Africa and the Middle East. Strategic alliances with the governments, banks and corporations in these regions along with the developed nations of Germany, the U.K., Australia, and Japan bode well for expansion into e-commerce in the emerging e-money sector.
  • The company has been making significant progress in its digital strategy and continuously investing in technology. With MasterPass, the company became the first network to deliver a digital payment service across all devices, all channels. It is also investing in tokenization technology with its Mastercard Digital Enablement Service (MDES), which supports contactless payments and Digital Secure Remote Payments.
  • Mastercard boasts a strong balance sheet with financial flexibility and continuous cash generated (that has been increasing since 2009 expect in 2014) from operating activities. It generated $5.6 billion of operating cash flow in 2017, up 22.5% year over year. The same was up 42.4% year over year in the first quarter of 2018.
  • MA average analyst rating is Buy. See MA analyst rating chart.
  • MA cash to debt ratio is 0.92, higher than the average industry (0.14) and sector (0.18) cash to debt ratio. See MA cash to debt chart.

7. What are the reasons to sell MA? Why should I sell MA stock?

Let's look at the reasons to sell MA stock (i.e., the bear case):

  • Mobile technology provides an opportunity for new entrants to disrupt long-standing payment standards, or relegate network offerings to merely "dumb pipes" carrying transaction data.
  • Legal and regulatory pressure against interchange fees and other aspects of the current value creation and transfer system is building.
  • As merchants have consolidated, their bargaining power has grown. Merchants would like nothing better than the emergence of a lower-cost payment paradigm.
  • Mastercard continues to face headwinds in maintaining the cost of operations of its vastly expanded business. Total operating expenses have been increasing over the last five years (2012-2017). The same was seen in the first quarter of 2018 as adjusted total operating expenses increased 35% owing to higher general and administrative expenses, depreciation and amortization and advertising and marketing costs.
  • The company has been incurring quite high levels of costs under rebates and incentives in order to gain customers and new business. These costs drained revenues by 5% in 2015 and 2% in 2016. The company witnessed a nearly 22% increase in rebates and incentives in 2017 and 16% in the first quarter of 2018, reflecting higher volumes and incentives for new and renewed deals. We believe, increasing client incentives will put pressure on the company’s bottom line.
  • Mastercard’s valuation looks stretched at the current level. Looking at the company’s forward 12-month price-to- earnings ratio (P/E), investors might not want to pay any further premium. The company is currently trading at a forward 12-month (P/E) ratio of 29.5 compared with a five-year trading range of 20.2 to 34.2, and is higher than its median of 24.8. It also compares unfavorably with the forward 12-month P/E ratio of 23.8 for the industry.
  • MA quarterly revenue growth was -18.90%, lower than the industry and sector average revenue growth (1.72% and 1.27%, respectively). See MA revenue growth chart.
  • MA profitability is declining. The YoY profit margin change was -6.34 percentage points. See MA profitability chart.
  • MA forward P/E ratio is 40.98, which is high compared to its industry peers’ P/E ratios. See MA forward P/E ratio chart.
  • MA Price/Book ratio is 55.38, which is high compared to its industry peers’ P/B ratios. See MA forward Price/Book ratio chart.
  • MA Price/Sales ratio is 22.02, which is high compared to its industry peers’ P/S ratios. See MA forward Price/Sales ratio chart.
  • MA PEG ratio (P/E adjusted for growth) is 4.81, which is high compared to its industry peers’ PEG ratios. See MA PEG chart.
  • MA Enterprise Value/Revenue multiple is 22.16, which is high compared to its industry peers’ Enterprise Value/Revenue multiples. See MA Enterprise Value/Revenue chart.

Key Stats

8. What are MA key stats : revenue, market cap, revenue growth, profit margin, P/E ratio, P/B ratio industry, sector, and number of employees?

Let's look at the key statistics for MA:

Metrics MA
Price $318.41
Average Price Target / Upside $360.85 / 13.33%
Average Analyst Rating Buy
Forward Dividend Yield 0.46%
Industry Credit Services
Sector Financial Services
Number of Employees 14,800
Market Cap $343.06B
Forward P/E Ratio 39.48
Price/Book Ratio 21.14
Revenue (TTM) $16.23B
YoY Quarterly Revenue Growth -18.90%
Profit Margin 45.12%

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