Mastercard Inc (MA) Common Stock

No recommendation - No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Mastercard’s fourth quarter revenue came in ahead of guidance, growing by 16% to $7.5bn when ignoring currency impacts. This was driven by growth in the payment network as well as value-added services and solutions. Underlying operating income grew broadly in line with revenue to $4.2bn. Over the full year free cash flow increased 21% to $14.1bn driven by profit growth and improved cash management. Annual dividend payments increased from $2.2bn to $2.5bn with share buybacks climbing from $9.0bn to $11.0bn. Net debt came in at $9.7bn. In the first quarter of the new year underlying revenue is expected to grow in the low-teens range with cost growth coming in slower at low double-digit levels. The shares were up 3.2% in early trading.

Our view

Mastercard had a strong end to 2024 helped by continued strength in consumer spending. Looking into the early part of 2025, that looks set to continue and the market’s responded favourably.

Despite fierce competition in the rest of the payments world, the card networks remain dominated by two giants: Visa and Mastercard. These networks enable banks to issue credit and debit cards without either network having to take any credit risk.

Notwithstanding the emergence of competing payment methods, card usage continues to grow and the model has proved its resilience through multiple economic ups and downs. In fact, Mastercard has grown revenue in all but one year since 2006. Despite the proliferation of payment methods, many of the newer kids on the block, such as Apple Pay and PayPal, still rely on cards for a big chunk of their transactions. The rise of cryptocurrencies is another potential threat, but for now it’s a trend that looks to be benefitting Mastercard’s results.

Services are also an important and faster-growing part of the business and one where Mastercard appears to be stealing an edge over its rivals. Growth is being driven by demand for cyber security and data analytics. That’s also helping Mastercard to steal more market share in the United States, boosting growth in what is now a mature market. Cash-to-card migration has all but run its course across the pond.

However, Mastercard has a more even geographical mix than its main rival, which is particularly dominant in the United States. That gives it more exposure to overseas markets where there’s still a tailwind blowing in Mastercard’s favour.

These services are helping too, but the functionality they provide merchants and financial institutions should also help to win market share, and that looks to be playing out in multiple territories. In an effort to win over more customers, rebates and incentives are also on the rise.

Keeping ahead of the pack doesn’t come cheap though, with research & development costs forecast to rise some 60% this year. But robust margins and strong cashflows mean these are commitments Mastercard can currently afford. This also leaves room for dividends and share buybacks, although no shareholder returns are guaranteed.

Mastercard’s revenue is forecast to outgrow its direct competitors over the next few years, which we believe is down to some of the structural differences discussed above. That’s reflected in its valuation sitting at the top end of the peer group on a price-to-earnings basis, adding pressure to deliver, and leaving the stock vulnerable to a downturn in economic activity.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

Previous Mastercard Inc updates