Argus: MasterCard Shares Could Appreciate 17%

Mastercard Inc MA reported 20-percent fourth quarter revenue growth to $3.3 billion and adjusted earnings per share of $1.14 — ahead of the $1.12 consensus estimate — on Thursday. 

The Analyst

Argus analyst Stephen Biggar upgraded MasterCard shares from Hold to Buy with a $200 price target, suggesting 17-percent upside from current levels.

The Thesis

MasterCard's Q4 showed continued strong purchase volumes and growth in cross-border volumes and processed transactions, Biggar said in a Friday note. (See the analyst's track record here.) 

The analyst said he expects MasterCard shares to trade above their historical average earnings multiple in the high 20s, given strong cyclical and secular trends of higher global consumer spending and the shift from cash to charge cards in the payment processing industry.

MasterCard is likely to drive growth by capturing more payment flows through its consumer, commercial and virtual cards and by leveraging its VocaLink acquisition, the analyst said.

The credit card issuer expects constant-currency revenue growth in the low teens; at least 50-percent operating margin; and mid-20 percent earnings per share growth for 2016-2018, according to Argus. 

"We like MasterCard's overall growth story, particularly relative to the broad market, and are maintaining long-term Buy rating," Biggar said. 

The Price Action

Mastercard shares are up more than 60 percent over the past year.

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