Is MasterCard a buy?
It’s time to talk about a major credit services company. Here is the breakdown on $MA, otherwise known as MasterCard.
Current Price: $386.17
52/Wk High: $389.50
52/Wk Low: $244.10
Market Cap: $383.0 Billion
Dividend: $0.44 / 0.47% Yield
Read below for the breakdown!
MasterCard ($MA) is a financial company in the electronic payments business, offering electronic payment methods and services to individuals and businesses of all sizes.
Sifting through MasterCard’s stock price according to TREFIS (@trefis) data, 34.2% of $MA is based on their Transaction Fees segment.
Furthermore, 28.5% is based on the Domestic Assessments segment, 22.4% Services Fees, and 15% International Fees.
Of recent, MasterCard has performed well, moving to the upside a moderate 18% throughout the past three months and 50% throughout the past year, leaving investors to wonder if MasterCard is still a buy.
While MasterCard has performed well within the markets, the COVID-19 pandemic has greatly affected earnings in a negative aspect with declining cross-border volume and flat rebates & incentives.
Digging into the numbers, MasterCard beat Q4 2020 expectations with an EPS of $1.64, better than the analyst’s EPS consensus estimate of $1.51. On a year-over-year basis, EPS declined -16.33%.
As for revenues, MasterCard reported Q4 revenues of $4.1 billion, representing a decrease of 7% year over year. For reference, the Q4 2019 revenues level was roughly $4.4 billion.
Shifting into income, MasterCard delivered a weaker Q4 net income of $1.8 billion, less than the Q4 2019 net income of $2.1 billion, representing a 15% decline.
Operating income declined as well, dropping to $2.1 billion from a stronger $2.4 billion, representing a 14% decline in operating income on a GAAP basis.
Margins declined as well, with operating margin dropping to 49.9% from 54.4%, representing a 4.4% decline on a year-over-year basis.
On a positive note, gross dollar volume (GDV) increased by 1%. Do note, that gross dollar volume is the aggregated dollar amount of purchases and disbursements made with MasterCard cards.
Management was upbeat about the future.
“We are encouraged by the availability of effective vaccines, and we remain focused on the innovations that will enrich the digital experience, strengthen security and trust, and enable choice through our multi-rail platform, all of which position us well for the future,” CEO Michael Miebach said.
Exploring the full year briefly, MasterCard reported FY 2020 revenues of $15.3 billion (Down 9% YoY) and a net income of $6.4 billion (Down 21% YoY), both of which declined due to COVID-19 headwinds.
Shifting into the balance sheet the numbers are solid.
Total Debt: $12.672 Billion
Total Liabilities: $27.193 Billion
Total Assets: $33.584 Billion
Cash & Short Term Inv: $10.596 Billion
On a valuation basis, MasterCard does trade at a premium.
Price to Earnings: 60.58x
Forward Price to Earnings: 37.07x
Price to Sales: 24.92x
Price to Book: 60.34x
Price to Cash Flow: 49.43x
Management has been very effective.
Return on Equity: 104.38%
Return on Assets: 20.41%
Return on Invested Capital: 33.01%
Given the numbers the analysts are bullish with a mean price target of $399.67/share, representing a 3.50% upside.
The high price target is $450.00/share, representing a 16.53% gain, while the low price target is $345.00/share, representing a -10.66% loss.
The big money is quite involved as well with 75.76% of MasterCard being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and State Street Global Advisors.
On a technical basis MasterCard is strong. According to the six-month charts $MA is moving strongly to the upside with a MACD range of 6.15 down to 4.64.
The six-month charts are also indicating an RSI of 66.2 and CCI of 137.6, both of which are on the high end.
In short, MasterCard ($MA) is a solid company that has suffered setbacks due to COVID-19, but as the world recovers from the pandemic, will likely thrive once again, and get back on the road to growth.
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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.