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This growth stock performs great in all weather markets. It will therefore be appreciated by every type of investor

Jamie Cameron
14. 12. 2022
4 min read

Although consumer confidence in the U.S. has been declining recently, indicating a slowdown in economic growth, and the Eurozone is heading into recession at the end of 2022, Mastercard is showing no signs of slowing business so far. On the contrary, the company beat analysts' revenue and earnings expectations in 3Q and management is more than optimistic about the future.

Mastercard processes payments with its branded payment cards between merchants and issuing banks

Mastercard $MA+0.1% is the second largest payment processor in the world, having processed nearly $6 trillion in purchase transactions during 2021, and that number is expected to grow in the coming years as the world moves toward a cashless society. Mastercard operates in more than 200 countries and processes transactions in more than 150 currencies.

Given its current market dominance and the potential for growth in other areas, it is likely that Mastercard will continue to do well. Although there are several fintech disruptors looking to take its place, Mastercard is holding its own. The company has shown resilience and the ability to change, which bodes well for its long-term prospects. While there is always the risk of new entrants entering the market, Mastercard has established itself as a leader and is well positioned to weather any storms that may arise.

Five-year MA stock price chart, Source: Google Finance

Global virtual card market size to grow by USD 65 billion by 2030

Mastercard recently entered into an agreement with Saber Corp. and Conferma Pay that includes Mastercard's minority investment in Conferma. The partnership with Mastercard allows Saber to enhance its virtual card offerings and expand its geographic reach. This also expands both companies' customer base.

The global virtual card market size is expected to grow from USD 11.7 billion in 2021 to USD 65.0 billion by 2030, at a CAGR of 21% during the forecast period. According to the latest research report by Spherical Insights & Consulting. Asia Pacific is expected to grow at the fastest rate during the forecast period.

Mastercard's financial results continue to impress

Key Financial Results:

  • Revenue: $5.76 billion (up 16% from Q3 2021).
  • Net Profit: $2.50 billion (up 3.5% from Q3 2021).
  • Profit margin: 43% (down from 48% in Q3 2021. Decrease in margin due to higher costs)
  • EPS: $2.59, (up from $2.45 in Q3 2021).
MA Q3 2022 results, Source: Mastercard Investor Relations

Revenue beat analysts' estimates by 1.7%. Earnings per share (EPS) were mostly in line with analyst estimates.

While MasterCard has outperformed the market so far this year, the question on investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable metric that can help investors address this question is the company's earnings outlook. Looking ahead, sales are projected to grow by an average of 14% pa over the next 3 years.

Mastercard paid out $474 million in dividends in the third quarter and offers a dividend yield of 0.56%. While not much, it's better than nothing. In addition, the company repurchased $1.6 billion worth of stock in the third quarter and made another $505 million worth of share repurchases during October.

Conclusion

Mastercard is a company that has always done well in recessions thanks to its lucrative business model. Its scale allows it to become an almost integral part of the global payments system. The industry is huge and growing as the world economy expands and developing countries begin to move towards cashless payments. It is therefore not surprising that it has such excellent foundations with its overall growth. This allows it to focus on rewarding its shareholders. Looking at the growth opportunities, the megatrends that underpin its growth seem here to stay.

On the other hand, the company trades at high valuation multiples. There are risks here, especially from new companies trying to challenge the duopoly. Therefore, the current valuation may not be justified. However, we are in volatile times and share prices fluctuate. Accordingly, it pays to have a company on your watch list.

Source: Guru Focus, Everything money, GlobeNewswire, Mastercard Investor Relations, Yahoo Finance

DISCLAIMER: All information provided here is for informational purposes only and is in no way an investment recommendation. Always do your own analysis.

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