Mastercard's master plan is working

Serving 25,000 members worldwide in more than 210 countries, Mastercard Inc. (NYSE: MA) is the second largest payment system, behind Visa (NYSE: V), issuing credit and debit brand cards which provide access to its transactions network. For a fee, of course.

And revenue from those fees and other charges is advancing at a solid pace. In general, analysts expect F2008 revenue to increase a solid 20-25%. Further, while U.S. gross dollar volume increases will slow with the slow-growth U.S. economy in 2008, international GDV growth should remain robust.

In addition, Mastercard has multiple opportunities to increase market share, both domestically and internationally, as acceptance of credit card use for non-traditional purchases grows. Analysts are also impressed by debit card and prepaid card program progress. The Reuters F2008/F2009 EPS consensus estimates for MA are $8.647/$10.86.

The risks? Mastercard remains vulnerable to a protracted U.S. economic slowdown, and analysts also are also keeping an eye on the rise of new competitors into the transaction space, primarily PayPal.

The First Call mean rating for MA is: Buy. [21 firms.] Mean 2008 target: $333. [high: $390, low: $245.]

Stock Analysis: Mastercard is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 2 years should be rewarded from MA's shares. Note: More-cautious investors may wish to wait until MA pulls-back to $270-280, but keep in mind Mastercard may not retreat to that level. Sell / Stop Loss if you were to purchase shares in this company: $215.

Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.