Company Reports

Mastercard's second-quarter results largely echoed what we saw from Visa and suggest consumer spending is holding at a level that will allow the networks to see solid growth.

Mastercard has multiple characteristics that should draw investors’ attention. First, despite ongoing evolution in the payment space, we think a wide moat surrounds the business and view Mastercard’s position in the current global electronic payment infrastructure as essentially unassailable. Second, Mastercard benefits from the ongoing global shift toward electronic payments, which should provide plenty of opportunities to leverage its wide moat and create value over the long term. Digital payments, on a global basis, surpassed cash payments just a few years ago, suggesting that this trend still has a lot of room to run, and we think emerging markets could offer a further leg of growth even as growth in developed markets starts to slow. Finally, Mastercard is something of a tollbooth business, and the company is relatively agnostic to smaller shifts within the electronic payment space, as it earns fees regardless of whether payment is credit, debit, or mobile.

Overall, we think Mastercard's first-quarter results were solid, but we think the market may be disappointed that the company didn't match Visa's strong showing.

Mastercard will acquire BVNK to expand its stablecoin offerings.

Mastercard has multiple characteristics that should draw investors’ attention. First, despite ongoing evolution in the payment space, we think a wide moat surrounds the business and view Mastercard’s position in the current global electronic payment infrastructure as essentially unassailable. Second, Mastercard benefits from the ongoing global shift toward electronic payments, which should provide plenty of opportunities to utilize its wide moat to create value over the long term. Digital payments, on a global basis, surpassed cash payments just a few years ago, suggesting that this trend still has a lot of room to run, and we think emerging markets could offer a further leg of growth even as growth in developed markets starts to slow. Finally, Mastercard is something of a tollbooth business, and the company is relatively agnostic to smaller shifts within the electronic payment space, as it earns fees regardless of whether payment is credit, debit, or mobile.

Mastercard's steady top-line growth in the fourth quarter suggests that consumer spending is holding up well.

The Wall Street Journal reported on Nov. 10 that Visa and Mastercard have reached a new settlement with merchants in an attempt to bring this long-running litigation to a close.

Mastercard's third-quarter results largely held steady sequentially, as consumer spending appears to be holding up.

Mastercard has multiple characteristics that should draw investors’ attention. First, despite ongoing evolution in the payment space, we think a wide moat surrounds the business and view Mastercard’s position in the current global electronic payment infrastructure as essentially unassailable. Second, Mastercard benefits from the ongoing shift toward electronic payments, which should provide plenty of opportunities to utilize its wide moat to create value over the long term. Digital payments, on a global basis, surpassed cash payments just a few years ago, suggesting that this trend still has a lot of room to run, and we think emerging markets could offer a further leg of growth even as growth in developed markets starts to slow. Finally, Mastercard is something of a tollbooth business, and the company is relatively agnostic to smaller shifts within the electronic payment space, as it earns fees regardless of whether payment is credit, debit, or mobile.

Mastercard's second-quarter results held strong, with management noting that consumer spending is holding up for now, echoing comments from its peer Visa.

According to The Wall Street Journal, large merchants such as Walmart and Amazon are exploring options to issue stablecoins in an attempt to bypass traditional payment systems and avoid fees.

Mastercard's first-quarter results contained no major surprises and largely mirrored what we saw from Visa. While consumer spending is holding steady for now, we see uncertainty ahead.

Mastercard has multiple characteristics that should draw investors’ attention. First, despite ongoing evolution in the payment space, we think a wide moat surrounds the business and view Mastercard’s position in the current global electronic payment infrastructure as essentially unassailable. Second, Mastercard benefits from the ongoing shift toward electronic payments, which should provide plenty of opportunities to utilize its wide moat to create value over the long term. Digital payments, on a global basis, surpassed cash payments just a few years ago, suggesting that this trend still has a lot of room to run, and we think emerging markets could offer a further leg of growth even as growth in developed markets starts to slow. Finally, Mastercard is something of a tollbooth business, and the company is relatively agnostic to smaller shifts within the electronic payment space, as it earns fees regardless of whether payment is credit, debit, or mobile.

Mastercard’s recent results suggested that consumer spending was largely holding steady as impacts from one-time issues started to fade. But fourth-quarter results suggest the environment may be improving a bit. We will maintain our $465 fair value estimate. We see the shares as modestly overvalued. The quarter suggests the near-term outlook may be a little better than we had anticipated, and we think the market is reacting to that, but we believe significant uncertainty still exists on this front.

We think Mastercard’s third-quarter earnings largely mirrored what we saw from Visa, although Mastercard appears to be performing a bit better at the margin. In recent quarters, we’ve seen pandemic, political, and macro effects dissipate, and we see this quarter as further evidence of stability. We think Mastercard’s attractive long-term growth prospects and its strong profitability become more clear in this type of situation. We will maintain our $465 fair value estimate for the wide-moat company and see shares as about fairly valued.

Mastercard announced that it will acquire Recorded Future for $2.65 billion. Recorded Future is a cyber defense company with 1,900 customers across 75 countries. Mastercard believes the addition of Recorded Future will add to its fraud prevention capabilities. Controlling fraud within its payment networks is an ongoing issue for Mastercard, so investing in this area seems appropriate. Due to its wide moat, we don’t think Mastercard needs to be aggressive in terms of mergers and acquisitions, but smaller deals like this that add certain capabilities make sense, in our view. However, the deal is not large enough to have a material impact on our $465 fair value estimate, which we maintain. We see Mastercard’s shares as fairly valued at the moment.

Mastercard has multiple characteristics that should draw investors’ attention. First, despite the evolution in the payment space, we think a wide moat surrounds the business and view Mastercard’s position in the current global electronic payment infrastructure as essentially unassailable. Second, Mastercard benefits from the ongoing shift toward electronic payments, which should provide plenty of opportunities to utilize its wide moat to create value over the long term. Digital payments, on a global basis, surpassed cash payments just a few years ago, suggesting that this trend still has a lot of room to run, and we think emerging markets could offer a further leg of growth even as growth in developed markets starts to slow. Finally, Mastercard is something of a tollbooth business, and the company is relatively agnostic to smaller shifts in the electronic payment space, as it earns fees regardless of whether payment is credit, debit, or mobile.

While Mastercard’s second-quarter results show many of the same dynamics we saw from Visa, Mastercard appears to be modestly outperforming its peer at the moment. We continue to believe that Mastercard has slightly stronger long-term prospects given its smaller size and lower exposure to relatively mature markets. We will maintain our $451 fair value estimate for the wide-moat company and see shares as fairly valued at the moment.

In March, Visa and Mastercard announced that they had reached a settlement to a long-standing antitrust lawsuit. As part of the agreement, the networks would slightly lower credit interchange fees and cap these fees at the current level for five years. At the time, we were happy to see this lawsuit seemingly resolved. But according to The Wall Street Journal, the judge has now informed Visa and Mastercard that she deems these changes inadequate and is unlikely to approve the settlement. This would presumably force the networks to arrange a new settlement or go to trial. While this is an obvious setback and we would prefer to see this matter closed as quickly as possible, we believe Visa and Mastercard’s unique competitive positions and their wide moats create ongoing legal and regulatory event risk, and this lawsuit represents just one piece of that. We will maintain our $272 and $451 fair value estimates for Visa and Mastercard, respectively, and see shares for both companies as about fairly valued.

Mastercard’s first-quarter results show that the company is on a steady path and performing roughly in line with its peer Visa. Following the dramatic ups and downs of the pandemic and the ensuing recovery, we think Mastercard has settled into a more stable environment, and the company’s first-quarter results are largely in line with our long-term expectations. We will maintain our $451 fair value estimate and wide moat rating, and we consider shares fairly valued at the moment.