We review our Buy case on Mastercard after shares corrected by 10% from its August 28 peak, utilising both Q2 results and post-Q2 data.
Card volumes are now in a “normalisation” phase in most markets, being 4-5% higher year on year in the U.S. and flat internationally in August.
High-margin cross-border volumes remain approx. 40% lower year on year, which means we expect Q3 EBIT to be 20% lower year on year.
COVID-19 has accelerated the move to digital payments; we expect EPS to more than recover by 2021 and grow at a mid-teens CAGR thereafter.
At $331.78, the shares can deliver an annualised return of 11.6% and a total return of 43% over 3.5 years. We reiterate our Buy rating.