On Wednesday, TD Cowen initiated coverage on shares of MasterCard (NYSE:MA) with a Buy rating and a price target set at $545.00. The firm highlighted MasterCard's position in the global consumer payments market, which is valued at approximately $45 trillion.
The analyst pointed out that MasterCard's high-growth and high-margin business is well-positioned for significant expansion in the medium to long term.
MasterCard's Value-Added Services (VAS) and New Flows are expanding the company's reach into new payment use cases. These services tap into an addressable payments volume of $210 trillion across various sectors, including business-to-business (B2B), business-to-consumer (B2C), government-to-consumer (G2C), and peer-to-peer (P2P) transactions.
The analyst predicts that these new avenues could add a few percentage points to the company's growth on top of the high single-digit growth base from consumer payments.
The report projects sustainable low-teens revenue growth for MasterCard, bolstered by the company's broadening exposure to new payment use cases. This growth is underpinned by the company's strong market position and the expansion of its services.
TD Cowen also forecasts potential for further earnings before interest and taxes (EBIT) margin expansion for MasterCard. As the company approaches an EBIT margin of around 60%, the firm expects mid-teens medium-term earnings per share (EPS) growth. This anticipated growth in margins and earnings is seen as a key driver for MasterCard's performance in the coming years.
InvestingPro Insights
TD Cowen's optimistic outlook on MasterCard aligns with several key metrics and highlights from InvestingPro. MasterCard's commitment to shareholder returns is evident through its impressive track record of raising dividends, now for 19 consecutive years.
This, combined with a dividend growth of 15.79% over the last twelve months as of Q4 2023, showcases the company's dedication to providing value to its investors. MasterCard's significant market capitalization of $438.41B USD reflects its strong position in the Financial Services industry, further solidifying the company as a prominent player.
While the company is trading at a high earnings multiple with a P/E ratio of 39.63, this is somewhat mitigated by the adjusted P/E ratio of 37.49 for the last twelve months as of Q4 2023. Moreover, MasterCard's revenue growth of 12.87% during the same period indicates a healthy expansion of its business. With a robust operating income margin of 57.96%, MasterCard's profitability is clear, aligning with the analysts' predictions of profitability for the year.
For investors seeking to delve deeper into MasterCard's prospects, InvestingPro offers additional insights and tips. There are currently 11 more InvestingPro Tips available, which can be accessed to gain a comprehensive understanding of MasterCard's financial health and market potential. Users interested in these insights can utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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