On Monday, financial services company MasterCard (NYSE:MA) received an Overweight rating from Piper Sandler, with a set shares target of $531.00. The new coverage is based on expectations of the company's robust revenue growth and expansion potential.
MasterCard is anticipated to achieve an 11.0% increase in revenue this year and a further 12.7% in FY25. This growth is projected to be fueled by a 9.5% and 13.5% rise in Payment Network revenue, which represents approximately 62% of the company's total revenues, for FY24 and FY25 respectively.
Additionally, the Value-added Services and Solutions segment is expected to grow by 13.7% in FY24 and 11.5% in FY25, accounting for around 38% of revenues.
The firm highlights MasterCard's significant market opportunity in consumer payments, noting the company's $9 trillion in annual transaction volume.
With a total addressable market (TAM) surpassing $250 trillion across various revenue channels, including domestic and cross-border transactions, processing, and value-added services, MasterCard is well-positioned for growth.
Piper Sandler also forecasts that MasterCard will continue to experience margin expansion, estimating an increase of 20 basis points in FY24 and 80 basis points in FY25.
The expansion is expected to come as MasterCard progresses in displacing cash as the preferred payment method and diversifies into new service and technology offerings.
InvestingPro Insights
MasterCard (NYSE:MA) stands as a prominent player in the Financial Services industry, with a notable market capitalization of $424.82 billion. According to real-time data from InvestingPro, the company is trading at a high P/E ratio of 36.31, indicating a premium valuation that reflects the market's high expectations for the company's future performance. Despite this, analysts have revised their earnings downwards for the upcoming period, suggesting that investors should keep a close eye on upcoming earnings releases and management commentary for signs of sustained profitability and growth.
InvestingPro Tips reveal that MasterCard has a track record of rewarding shareholders, having raised its dividend for 12 consecutive years and maintained dividend payments for 19 consecutive years. The company's robust cash flows can sufficiently cover interest payments, which is a reassuring sign for income-focused investors. Moreover, with a dividend yield of 0.58%, MasterCard continues to be an attractive option for those seeking steady income streams.
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