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The shares of MasterCard (MA), which I first wrote about on April 13, 2009, at a price of $176.06, corrected roughly in-sync with the Dow's late-January/early-February correction, but just look on the above as a chance to scoop-up MA shares at a decent price.
The reason? MasterCard has emerged from the nation's worst recession in more than 25 years in enviable shape, even amid the frugal consumer era that's likely to restrict U.S. consumer spending. Look for transaction growth to continue, as a result of the global trend toward increased use of credit cards. Revenue should increase an impressive 9% to 12% in 2010 and 10 % to 15% in 2011.
Further, international revenue growth should shine, and will serve to more than bolster the stock until U.S. revenue growth picks up steam in the second half of 2010. Again, U.S. gross dollar volume may not be spectacular in 2010, as consumers stay within reduced budgets, but the increased use of credit cards for nontraditional transactions (translation: market share gains), will set MA up for nice revenue gains when U.S. salaries resume rising.
The First Call FY2010/FY2011 EPS estimates for MA are $13.48 to $16.11. Each EPS estimate looks about 10% low, according to my analysis.
Technically, as noted, MasterCard's shares corrected along with the market earlier this year, and the stock will encounter psychological resistance at $300, but this should prove to be minor. According to my analysis, MA is head north; a $320 price by the end of 2010 is not unreasonable.
2010 Outlook: I view MasterCard as a long-term play, but if investors are looking to sell MA within the year, it's probably best to take your profits after it rises to $290 to $295, if it fails to clear $300.
Stock Analysis: I consider MasterCard to be a moderate-risk stock. If an investor has already purchased the company's shares, I'd hold them. If not, I'd consider buying a 25% position in MA now, then buy another 25% in one month if U.S. and global economic conditions don't worsen substantially. Under any circumstance, I wouldn't buy more than 50% of my MA position before June 2010 and I'd put a sell/stop loss at $176.
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Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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