Mastercard's Latest Virtual Card App Move to Boost Contactless Payments; Analyst Eyes Substantial Growth Citing Advanced Security and Digital Innovations

Mastercard Inc. MA launched a mobile virtual card application Thursday, changing the way virtual commercial cards integrate with digital wallets. 

The innovation aims to provide financial institutions with diverse options for delivering secure, eco-friendly, and contactless payment methods that modern businesses demand. 

The shift towards digital wallets, particularly among millennials, underscores the move towards more convenient contactless payments through mobile technology.

Also Read: Mastercard Revamps Structure for Growth, New Teams to Drive Core Payments and Services

The app capitalizes on Mastercard’s advanced virtual card and tokenization technology.

The application’s design emphasizes security, featuring biometric authentication, PIN-protected card detail access, and tokenization for enhanced data protection. 

The app accommodates cards from multiple issuing financial institutions, ensuring a comprehensive management system for users.

HSBC Australia and Westpac will be the first to extend this mobile wallet functionality to their corporate customers through the Mastercard app.

Baird analyst David Koning maintained Mastercard with an Outperform rating and raised the price target from $525 to $545.

For the first quarter, revenue and EPS will likely be above consensus predictions. As per the analyst, EPS will likely be around $3.31-3.33, slightly higher than the Street’s $3.24. 

Revenue will likely be approximately $6.44 billion, surpassing the Street’s expectation of $6.34 billion. This reflects an 11% organic constant currency growth. Koning said that the impact of the foreign exchange remains unchanged from Q4, offering a slight tailwind.

Assessments contribute 25-30% of gross revenue, with the analyst’s consensus possibly being a bit high at about $2.44 billion.

He stated that Transaction Processing, which makes up 35-40% of revenue, is expected to be more than the consensus, at around $3.14 billion, indicating stable transaction growth.

Cross-border revenues, forming 15-20% of the total, are slightly underestimated in consensus at $2.17 billion; a more reasonable estimate is around $2.18 billion, Koning said.

According to the analyst, value-added services are likely to grow organically in the mid-teens in constant currency terms, aligning with street expectations.

He added that rebates and incentives as a percentage of gross revenue will likely be milder than the consensus suggests.

The guidance for 2024 is likely to reiterate most aspects, with a slight increase in revenue expectations to accommodate a first-quarter beat despite a 0.5% additional FX headwind since the last report. 

Koning said that this could imply a revenue range of $28-28.2 billion, aligning with the consensus of $28.1 billion.

The stock is favored for 2024, primarily due to the anticipation of over 15% EPS growth, supported by a stable valuation multiple.

Price Actions: MA shares traded higher by 0.01% to $454.74 on the last check Friday. 

Also Read: Mastercard Boosts Rewards with New Brand Partnerships On The Back Of Upcoming Fee Hikes

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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