Current Developments Surrounding Mastercard's Shares
Current Developments Surrounding Mastercard's Shares
Mastercard's (NYSE: MA) shares have climbed around 25% this year, contrasting the 27% increase in the S&P500 index. Visa (NYSE: V), a competitor, has only managed a 22% return. What's propelling Mastercard's share price upward?
The company exceeded analyst predictions in the third quarter of fiscal 2024, reporting a $7.4 billion revenue, a 13% year-on-year rise. Several factors are fueling the company's growth. For instance, cross-border volumes surged by 17% due to an increase in international travel and e-commerce, as well as a 10% increase in gross dollar volumes. The number of switched transactions also went up by 11%. Switched transactions refer to transactions processed via Mastercard's platform.
Moreover, revenues from value-added services and solutions grew by 18% in the quarter due to higher demand for the company's consulting and marketing services, and the expansion of its fraud and security, and identity and authentication solutions. Adjusted net income increased by roughly 12% to $3.6 billion, although at a slower rate than revenues due to higher general and administrative expenses.
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The increase in MA's stock price over the past 4 years has been uneven, although annual returns have been less volatile than the S&P 500. The stock returned 1% in 2021, -3% in 2022, and 23% in 2023. In contrast, the High Quality Portfolio, comprising 30 stocks, has been less volatile and outperformed the S&P 500 each year during the same period. Why is this? As a group, the High Quality Portfolio's stocks provided better returns with lower risk compared to the benchmark index, as demonstrated by the High Quality Portfolio's performance metrics.
Looking ahead, what might impact MA's stock? The Fed's recent interest rate cuts could reduce borrowing costs, potentially boosting credit card spending and benefiting Mastercard's transaction volumes and fee revenues. Additionally, Mastercard's expansion into emerging markets, such as Asia, the Middle East, and Africa, could provide more growth opportunities given the company's strong brand name and the growing trend towards digital and cashless transactions. Mastercard is also prioritizing shareholder returns. The company's board recently approved a new $12 billion stock buyback program, and also increased its quarterly dividend to $0.76, up from $0.66. We value Mastercard's stock at approximately $518 per share, which is roughly in line with its current market price. Check out our analysis on *Mastercard's valuation.
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Mastercard's strong third-quarter performance, with a revenue of $7.4 billion and a 13% year-on-year increase, likely contributed to the company's valuation, as highlighted in the analysis of its stock. Mastercard's significant growth in value-added services and solutions revenue, driven by higher demand for its consulting and marketing services, also played a role in boosting MA's Mastercard's revenue.