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MasterCard: $1,000 Is Inevitable

Numerous articles have been published asking which is the next $1,000 stock. Ever since and Google crossed the $1,000 per share mark, investors seem increasingly eager to know which company will be next to join the club.

MasterCard  (NYSE: MA  ) seems a likely candidate. The stock is already trading around $750 and has an average annual stock return of approximately 25% over the last three years. At this rate, shares of MasterCard would cross the $1,000 mark sometime in 2015. However, if the stock's impressive year-to-date rise of 50% is any indication, the $1,000 threshold may be closer than you think!

Yet, investors who fixate solely on the price per share of MasterCard often miss the more crucial aspects of the stock's growth story, which is one of the strongest in recent memory.

Growth story
Similar to its larger rival Visa (NYSE: V  ) , MasterCard is positioned to benefit from the continuing global shift away from cash and toward electronic forms of payment. The two most dominant payment processors in the world, MasterCard and Visa have a stranglehold on credit/debit card markets and emerging digital platforms.

According to MasterCard CEO Ajay Banga's recent estimates, approximately 50% of consumers in the U.S. and 85% of those around the world still use cash/check as a primary form of payment. To capitalize on this massive global potential, MasterCard has been aggressively promoting its brand in markets such as Latin America, Asia, and Africa -- the latter of which remains largely unbanked.

Additionally, MasterCard has been forging deals with companies such as Hawaiian Airlines to bolster continued growth in domestic markets. The approach is working, as MasterCard's American business grew in the third quarter on impressive volume growth of 9%, despite flat consumer spending.

Growth estimates for MasterCard in fiscal 2014 call for a 12.2% increase in revenue and a 17.7% increase in earnings per share. These estimates compare favorably to Visa's projected revenue growth of 10.2% and EPS growth of 16.9% in the same year. Furthermore, management at MasterCard recently reiterated its commitment of 11% to 14% net revenue CAGR and at least 20% EPS CAGR out to 2015.

Safety and security
Since the global growth story is so strong, what's to stop competitors from trying to eat into its market share? Besides the massive processing infrastructure already in place, which makes it difficult for any upstart company to realistically compete, MasterCard is focusing on safety and security.

The goal is not to just supply the world with increasing payment options but to do so with an emphasis on protecting the consumer. To this end, MasterCard has joined with Visa and American Express to form a token system. Tokenization, which seeks to replace traditional account numbers with digital tokens, would essentially make the consumer's sensitive information available only to the card-issuing banks and not to merchants. The merchants would simply see the token and would no longer have to worry about keeping the consumer's information safe and secure.

This is a system that would most likely be welcome by both consumers and merchants as it means safer payment processing, with less work. It also means the transition from cash/check to digital payments could be a lot smoother going forward, which is beneficial to MasterCard and its peers.

The trend toward digital payment solutions shows no sign of slowing down. With continued advancements in technology, the transition may be about to get even easier for consumers and merchants. MasterCard is the best way for investors to capitalize on this global shift, as the stock is projected to offer robust revenue and EPS growth going forward.

With impressive financial metrics, including zero debt, over $5 billion in cash, and a robust profit margin of 38%, it is only a matter of time before MasterCard reaches $1,000. Just don't be surprised if it happens sooner rather than later.

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