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Mastercard: Revenue Growth Resumed In Q1, 10%+ Annualized Return Ahead

May 03, 2021 5:44 AM ETMastercard Incorporated (MA)AXP16 Comments
Librarian Capital profile picture
Librarian Capital


  • Mastercard returned to positive year-on-year revenue growth in Q1 2021, with volume up double-digits both globally and in the U.S.
  • Volume recovery is accelerating and visible in March and April figures; there is significant pent-up demand in high-margin Travel.
  • Mastercard continued to make strategic progress in value-add services, in winning customers and in building its "multi-rail" with M&A.
  • Management outlook implies a 20% year-on-year EBIT recovery in Q2, and their comments point to continuing P&L recovery in H2.
  • At $382.06, we expect an exit price of $554 and a total return of 48% (11.3% annualized) in just under 4 years. Buy.

Lviv, Ukraine - August 2019.
Photo by Serhii Ivashchuk/iStock Editorial via Getty Images

Why is Mastercard Stock Down?

Mastercard (NYSE:MA) released its Q1 2021 results last Thursday (April 29) morning, and shares have fallen by 3.4% in the subsequent two days.

We initiated our

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Librarian Capital profile picture
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Analyst’s Disclosure: I am/we are long MA, V, PYPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (16)

Value Yield Investing profile picture
Thanks for the article. In addition to the near-term estimates, do you have a long-term estimate regarding the growth rate for Mastercard over - let's say - the next 10 years?
Librarian Capital profile picture
@Value Yield Investing Thank you for reading. I would expect 10-year growth to be similar to 5-year but a bit lower, probably still in the low-to-mid teens (for EPS).
Dividend Latitude profile picture
Revenue growth resumed? That's good news, and it's about time! I say that because TD surpassed MA as my largest position last week. That should never have happened.
Librarian Capital profile picture
@Dividend Latitude Thank you for sharing. That's a nice problem to have, I guess.
Are they using crypto or blockchain yet?
Librarian Capital profile picture
@kata From the Q1 2021 call:

"We have several new crypto partnerships approved for launch this quarter including a partnership with Gemini, a leading crypto platform here in the US to launch a first of its kind cryptocurrency rewards credit card that allows consumers to receive crypto rewards on everyday purchases.

And over in Spain, Crypton, a crypto exchange launching a Mastercard Crypto Card.

On central bank digital currencies, we continue to engage with central banks around the world and our virtual testing platform is helping them design features similar issuance and evaluate interoperability with existing payment systems. In partnership with the Central Bank of Bahamas and Island Pay, we launched the world's first CBDC-linked payment card, enabling people to pay for goods and services using fiat currency anywhere Mastercard is accepted."
@Librarian Capital

thank you :)
ChuckXX ...as a holder of MA since the IPO I agree with your thoughts regarding government going after transaction fees. However I do believe whatever settlements occur. The issuers will pay the lion's share since the vast majority of the profis from the transactions go into their pockets. Long MA and V.
Librarian Capital profile picture
@tom g I am not sure this is true. Substantial settlement penalties do appear on Visa/Mastercard's P&L, and any reduction in interchange fees will also be borne by them.
ChuckXX profile picture
I have owned MA since its IPO back in 2006 & its my 2nd largest holding. I own a boatload of shares thanks to the 10 for 1 split on JAN. 22nd, 2014. I've said this before but it bears repeating. The greatest threat to both MA & V is not their competitors BUT its the Governments of the world. For those that do not know MA is being sued by the EU for around $13 Billion on an anti-trust case and V is being investigated by our DOJ on debit card fees. Most investors know there is no true dishonest behavior going on but most likely both companies will settle like they have in the past. These governments see these 2 companies as ripe for the picking and they love fleecing them of their profits. At some point down the road they will also come for AMZN, MSFT, AAPL, GOOG, & FB. They have to feed their insatiable thirst for their socialism agenda and please the masses. Its not really as complicated as people make it.
Librarian Capital profile picture
@ChuckXX Thank you for leaving good comments as usual. I agree MA/V's business model are very strong and can threatened only by government/regulator action. I talked about this in some detail in my most recent article on Visa a few weeks ago:


Many people have referred to MA/V as a duopoly in the past.

I am long both Visa and Mastercard. However, I am also long shares in other companies and have parents who were small business owners before they retired. So I am not keen for V/MA to have unfettered power to charge whatever they like - some regulatory push-back is healthy, and the US has a good history of anti-trust enforcement going back to the time of President Theodore Roosevelt in the early 1900s.

The current main lawsuit against Mastercard is a class action in the UK., led by individuals. The EU has just approved Mastercard's acquisition of Nets Corporate Services, as mentioned in the article, with the only remedy required being the licensing of Nets technology to one competitor.
@Librarian Capital

There's Pypl and Amex and Alipay, prob the biggest of all, and somehow I don't see anyone but China attempting to rein it in.

sounds like competition to me
Librarian Capital profile picture

American Express is probably the only like-for-like competition in that list, and AmEx's model is inferior to Mastercard's because (1) AmEx cannot count on the marketing spend and balance sheet strength of card-issuing banks the way Mastercard can; (2) AmEx's acceptance network outside the US has still not reached parity with Mastercard.

PayPal is not really competition at this point, being more targeted at previously unserved use cases like P2P or people who don't have credit cards. Over time it will become more of a competition in online e-commerce and maybe even physical checkouts, but PayPal is still relatively small and there is enough room for everyone.

Alipay and Mastercard have low overlap. Alipay really only operates in China, where Mastercard has only been given approval to process domestic transactions recently. Outside China Alipay is really only in a few businesses which serve Chinese customers. You will almost never find a US/Europe consumer using Alipay.
I’m pretty sure MasterCard will blow past conservative estimates for the rest of the year. Things will come back faster than expected due to pent up demand and all the work they’ve done during covid to drive contactless and online shopping will pay off big time. Also expect fuel prices to lift and inflation to flow though which is great for MasterCard.
Librarian Capital profile picture
@ozcutty1 Thanks. You might be right, but ultimately the short term is hard to predict and only forms a small part of a company's intrinsic value.
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