MasterCard's Growth Prospects Look Solid: Time To Buy?

On Nov 18, 2016, we issued an updated research report on MasterCard Inc. (NYSE:MA) . The Purchase, NY-based payment processing giant continues to depict strength in several areas, including a solid revenue growth momentum.

Net revenue increased 12% year-over-year to $8.0 billion for the nine months ended Sep 2016, driven by higher processed transactions, increased cross-border volumes and gross dollar volume. The company remains well poised for growth given its strong market position, solid global brand recognition and the current broader trend of shift towards electronic payments from paper-based forms.

Further, the company remains focused on opportunities through strategic acquisitions and alliances. In an effort to support its mobile-payments initiative and boost online payments volume, in Sep 2016, MasterCard expanded its partnership with PayPal Holdings, Inc. (NASDAQ:PYPL) . Further, in Jul 2016, MasterCard inked a deal to acquire 92.4% of London-based Vocalink Holdings Limited which operates major payments technology platforms for the U.K. payment schemes. This acquisition is expected to be closed in mid-2017.

However, escalating costs continue to limit the company’s profitability. During the nine months ended Sep 2016, total operating expenses increased 14% (or 16% on a currency-neutral basis) from the prior-year period. The rise was mainly due to continued investments tied with digital initiatives, data analytics and geographic expansion, as well as higher legal costs.

For 2016, management expects total operating expense to increase in the low double-digit range, excluding special items. On a currency neutral basis, it continues to expect a low double-digit increase. Nevertheless, it expects positive operating leverage for the year.

Shares of MasterCard have gained more than 10% over the past three months.