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With a market capitalization of $441.5 billion, Mastercard (MA) is one of the world’s leading payment technology companies. Its core business revolves around enabling electronic payments through its branded credit, debit, and prepaid cards. Over the past decade, this fintech stock has returned nearly 510%.
As the digital payments industry continues to evolve with the help of artificial intelligence (AI), fintech companies such as Mastercard are leveraging AI to expand. Mastercard also accounts for 0.7% of Warren Buffett’s holding company, Berkshire Hathaway (BRK.B).
Mastercard's stock has gained 24% YTD. Let’s find out if it is a good time to buy this resilient fintech stock.
Mastercard Is a Resilient Fintech Company
Founded in 1966, Mastercard operates in over 210 countries. Despite competition from strong players such as Visa (V) and PayPal (PYPL), Mastercard has established a stronghold in the global digital payment market.
In the most recent third quarter, Mastercard generated $7.4 billion in revenue, marking a 13% year-over-year increase. Adjusted earnings also increased 15% to $3.89 per share. Both revenue and earnings beat consensus estimates.
The company’s cross-border transaction volume increased by 17% year-over-year, indicating strong international demand for Mastercard services. Revenue from value-added services increased 18%. This segment includes a wide range of offerings in security, data analytics, identity management, marketing solutions, and gateway services.
Mastercard is also a dividend stock. Its forward yield of 0.58% is lower than the financial sector average of 3.18%. However, its low forward payout ratio of 18.7% indicates that the company can continue to pay dividends while leaving room for future dividend growth. In the third quarter, it distributed $611 million in dividends and repurchased shares worth $2.9 million.
On Dec. 17, Mastercard also announced a 15% increase in its quarterly dividend to $0.76 per share, along with a new share repurchase program worth $12 billion. On the balance sheet, Mastercard’s cash and cash equivalents balance stood just below $13 billion. However, its debt-to-equity ratio remains high at 2.46x. While the company’s debt load has increased over time, its strong net earnings of $12.3 billion over the trailing twelve months (TTM) give it ample capacity to pay down its debt eventually.
Notably, analysts predict Mastercard’s revenue and earnings will increase by 11.8% and 18.1% in 2024. Revenue and earnings are further expected to increase by 12.1% and 12.8%, respectively, in 2025.
Currently, Mastercard stock is valued at 32 times forward estimated 2025 earnings, compared to its five-year historical P/E average of 40.7x. Based on the expected growth rate in 2025, the stock may appear to be a bit expensive. However, the company’s strong fundamentals and consistent growth make it an appealing investment for those looking to build long-term wealth.
What Does Wall Street Say About Mastercard Stock?
Overall, on Wall Street, Mastercard stock is a "Strong Buy.” Out of the 37 analysts that cover the stock, 29 have given it a “Strong Buy” rating, while three have a “Moderate Buy” rating, and five analysts recommend a “Hold.”
The mean analyst target price for Mastercard stock is $568.83, which is 8.2% above current levels. Its high target price of $654 suggests 24.4% upside over the next 12 months
Is MA Stock a Buy Now?
Overall, Mastercard stock is a solid choice for long-term investors who are looking for steady, high-quality growth. With a global push toward digital payments, Mastercard’s expansion is far from over.
While the stock may appear overpriced in the short term, its strong financial position, solid growth drivers, and strategic investments in emerging markets, digital payments, and cross-border transactions make it an excellent addition to a well-diversified portfolio.
