Mastercard: Low-Teens EPS Growth in Q3 Despite Headwinds; Cheap at 29x P/E

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

Summary

• MA stock has fallen 23% from their peak, including 3% since Q3 results last Thursday - sentiment driven and unfair in our view.

• Q3 results showed why MA will continue compounding long-term, with EPS up 12.9% despite Russia and currency headwinds.

• Cross-border revenues are still rebounding, other revenue lines also showed strong growth, and EBIT margin again expanded.

• MA stock has a 29x P/E relative to 2022 earnings, which were artificially lower due to COVID and will likely prove resilient in a downturn.

• With shares at $309.17, our forecasts indicate a total return of 92% (23.0% annualized) by 2025 year-end. Buy.

Introduction

Mastercard Inc. reported Q3 2022 results last Thursday (October 27); shares have fallen 3.2% since then.

We initiated our Buy rating on Mastercard in April 2019. After 3.5 years, MA stock has gained 34% (including dividends), though the share price is down 23% from its peak and down 13% since the end of 2020.

Q3 results showed why Mastercard will continue to be a …