Mastercard: Double-Digit Return Thesis Intact Despite 10% Correction

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About: Mastercard Incorporated (MA), Includes: AXP, PYPL, V
by: Librarian Capital
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Librarian Capital
Hedge Fund Analyst, Long/Short Equity
Summary

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.

Introduction

We review our investment case on Mastercard (NYSE:MA) after shares corrected by nearly 10% from their $367.25 peak on August 28.

Since our initial Buy rating in March 2019, MA shares have