Mastercard: Consumer Strength & Travel Recovery Continued In Q2

(Preview) Company Update (MA US) (Buy)

Summary

• Q2 again saw consumer strength and Travel recovery for Mastercard; switched volume grew 26% and Travel volume grew 154%.

• Mastercard revenue grew 21% year-on-year, despite currency and Russia-related headwinds, and EPS grew 32% year-on-year.

• Management raised their full-year outlook; we believe this implies a 23% growth in EBIT this year, continuing a long-term mid-teens CAGR.

• Mastercard shares are trading at 41x 2021 EPS, in line with our long-term assumption; on 2022 EPS, P/E is 34x.

• With shares at $352.45, we expect an exit price of $644 and a total return of 86% (20.0% annualized) by 2025 year-end. Buy.

Introduction

Mastercard Inc. reported Q2 2022 results on Thursday (July 28), and shares closed up 2.7% that day.

We initiated our Buy rating on Mastercard in April 2019. Total gain since then currently stands at 39% after just over three years, though MA’s stock price has fallen 10% in the past year.

Q2 marked another great quarter for Mastercard. Consumer spending was strong, and cr…