Analysts: Put Your Chips On Mastercard

Strong consumer spending carried Mastercard Inc MA to yet another record quarter. The stock surged Thursday on a bottom-line beat and raised outlook.

“After preparing themselves for conservative commentary and three-year targets given FX and crossborder headwinds, we think investors should be very encouraged by MA management’s commentary, especially as it is becoming clear that the company can find new ways to deliver value to merchants, consumers and bank partners with services, etc.,” Morgan Stanley analyst James Faucette wrote.

Looking Forward

Mastercard exceeded Visa Inc V in holiday card use and cross-border spending growth. Over the last year, its latter rate outperformed low expectations to surpass previously strong annual records.

Tigress Financial analyst Ivan Feinseth expects another year-over-year pop in gross dollar volume and continued innovation.

“MasterCard continues to win new deals with banks and merchants with limited need to increase incentives,” Feinseth wrote in his daily newsletter. “I believe MasterCard’s success in new product wins is driven by its innovative capability to include state-of-the-art technology that increases security and offers greater payment functionality.”

Faucette expects revenue growth in the teens over the next few years given new service launches, macro tailwinds, market share gains and secular growth.

“MA has substantial natural operating leverage, given its largely fixed cost model and significant scale,” Faucette wrote. “High incremental margins should give the company the flexibility to invest in growing its total addressable market via business-to-business, faster payments, etc., and drive compounding earnings growth longer term.”

Mastercard is expected to profit from international expansion, co-branded card development, and broadening capabilities for corporate clients.

Ratings

Morgan Stanley maintained an Overweight rating on the stock with a $229 price target. Tigress Financial recommends purchase and forecasted a price surge above Mastercard’s $225 all-time high in the next six-to-nine months.

At time of publication, Mastercard traded up 1 percent at $213.68.

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The Credit Card Logo Formerly Known As Mastercard