Mastercard Is Long-Term Compounder Trading At Discount To Defensive Sectors, Analysts Say Post Q4 Beat

Raymond James analyst John Davis maintained Mastercard Inc MA with an Outperform and raised the price target from $406 to $450.

The analyst highlighted double-digit+ revenue growth with mid-teens+ EPS growth at a discount to historical multiples (defensive sectors trading at a premium), with estimates biased higher. 

Moreover, the analyst believes the payment networks will become the large-cap tech stocks to own over the next 6+ months and recommend investors add to positions.

BMO Capital analyst James Fotheringham maintained an Outperform and lowered the price target from $427 to $414.

Revenue guidance assumes resilient consumer spending and continued cross-border travel recovery.

Most regions have recovered to pre-pandemic levels of travel activity, apart from APAC, where cross-border is still well below 2019 levels due to COVID restrictions. For instance, China's inbound and outbound volumes are still only 20% and 50% of 2019, respectively, and still offer upside growth potential. 

Baird analyst David J. Koning had an Outperform with a $410 price target.

The Q4 results beat the Koning and consensus estimates, and 2023 guidance is mildly above consensus; the analyst like the stock as a long-term compounder.

The analyst expects ~15-20%+ organic constant-fx EPS growth over the next few years, benefiting from a recovery in cross-border, inflation, and international markets. 

Barclays analyst Ramsey El-Assal also cited similar recovery-related tailwinds while assigning an Overweight rating with a $427 price target.

RBC analyst Daniel R. Perlin had an Outperform rating with a $392 price target.

The Q4 results reflect stability in consumer spending and continued acceleration in cross-border volume growth.

The analyst believes management's tone this quarter reflects a slightly more optimistic view heading into FY23 vs. prior calls. The consumer resilience, China's re-opening, FX reversal, and the pace and mix of new client win set up well for FY24.

Credit Suisse analyst Moshe Orenbuch had an Outperform rating with a $390 price target.

The analyst believes that Mastercard has attractive qualities in the current environment, including profitability, balanced exposure, ability to grow through moderate recessionary conditions, inflationary benefits, and mix shifts.

Loop Capital analyst Hal Goetsch had a Hold rating with a $360 price target.

While very strong, the company's EPS growth continues to decelerate from over 50% earlier in the year. It was a terrific year for MA, and guidance for 2023 calls for low-teens top-line growth, with expense growth growing slower than sales, leading to expected and consistent margin expansion. The growth algorithm is on track and impressed the analyst. 

Slowing growth and tough comparisons from back-to-back years of a bounce back in cross-border transactions and travel and the lingering benefits of global stimulus kept the analyst cautious about the shares of MA at current valuation levels.

Price Action: MA shares closed lower by 0.90% at $373.86 on Friday.