Mastercard Surges: Analyzing the Stock’s Strong Performance

Key Factors Behind Mastercard’s Growth

Mastercard’s stock (NYSE: MA) has climbed about 25% so far this year, surpassing the S&P 500 index’s increase of 27%. Meanwhile, Visa (NYSE: V), a major competitor, has seen a return of approximately 22%. What are the driving forces behind Mastercard’s impressive performance?

In the third quarter of FY 2024, Mastercard exceeded analysts’ expectations, reporting net revenues of $7.4 billion—a 13% increase from last year. A few key elements contribute to this growth. Notably, cross-border transaction volumes rose by 17% year-over-year, fueled by a rebound in international travel and e-commerce expansion. Gross dollar volumes grew by 10%, while switched transactions, which refer to those processed through Mastercard’s platform, increased by 11%. For investors seeking less volatility than individual stocks, the High Quality portfolio offers an alternative, having outperformed the S&P 500 with over 91% returns since its inception.

Expanding Services and Financials

Moreover, revenues from Mastercard’s value-added services rose by 18% in the quarter. The demand for the company’s consulting and marketing services, along with enhancements in its fraud protection and authentication solutions, played a substantial role in this increase. Adjusted net income rose about 12% year-over-year to $3.6 billion, although this growth was slightly slower due to elevated administrative costs.

While Mastercard’s stock performance over the past four years has seen fluctuations, the annual returns remain notably stable. For instance, the stock returned 1% in 2021, fell by 3% in 2022, and rebounded with a 23% increase in 2023. In comparison, the Trefis High Quality (HQ) Portfolio has displayed less volatility while outperforming the S&P 500 consistently. Why is the HQ Portfolio effective? It has demonstrated superior returns with reduced risk compared to the benchmark index, resulting in a smoother investment experience.

Future Outlook for Mastercard Stock

Looking ahead, a couple of trends could bolster Mastercard’s stock. The recent cuts to interest rates by the Federal Reserve may lead to lower borrowing costs, potentially increasing credit card usage and benefiting Mastercard’s transaction volumes and fee revenues. Additionally, the company’s ongoing investments in emerging markets, particularly in Asia, the Middle East, and Africa, position it well for future growth amid the rise of digital and cashless transactions.

Mastercard is also committed to enhancing shareholder value, having recently approved a new share repurchase program of up to $12 billion. Furthermore, the company raised its quarterly dividend from $0.66 to $0.76. Analysts value Mastercard stock at approximately $518 per share, aligning closely with its current market price. For further insights, check out our detailed analysis of Mastercard’s valuation.

[1] Returns as of 12/18/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.