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MasterCard Inc. (NYSE: MA) is one of several companies at the center of the global payments revolution. Around for almost a half-century, electronic payment by credit card (and by its companion, the debit card) started to gain momentum in the 1990s when technological advances enabled more small shops and vending machines to accommodate the cards. Once cost prohibitive, it's now commonplace for customers to swipe cards at drug stores, theaters, in parking garages, and even in taxi cabs.
Analysts see strong growth in the electronic payments sector, and MasterCard is in an enviable position to grab a substantial portion of that business. Analysts see MA's revenue advancing by at least 15% for 2007-2009. Further, analysts see ample opportunities for international expansion: the electronic payments business is in its infancy, a fact that will help offset likely price competition in transaction fees. The Reuters F2007/F2008 EPS consensus estimates for MA are $5.44/$6.59.
The risks? Rival technologies and payment systems, such as PayPal, pose a significant threat, as do e-check systems. Each is likely to increase its market share in the decade ahead. Still, the pie is expanding at such a high rate that MasterCard will likely shine in the sector, moving forward.
The First Call mean rating for MA is: Hold (20 firms). The mean 2007 target is $170.80 (with a high of $300 and a low of $88).
Stock Analysis: MasterCard is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than one year should be rewarded from MA's shares. Consider a stop loss of $134.
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Reader Comments (Page 1 of 1)
11-05-2007 @ 2:00PM
william lindblad said...
Moderate risk? Viewpoint is short sighted. MC profits were mostly abroad and given the currency disparities, this could quickly dry up. The housing difficulties and resultant credit problems are already known and likely to worsen in 2008. As payrolls diminish in the better paying construction industry, so will credit/debit card use. It is well known that credit card debt is at all time highs, even reaching into the fixed income set. It is quite possible that this will be the next financial area to see default.
Considering stock price - this is high risk.