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Investors Love Mastercard's Recent Moves

By Brian Withers and Brian Feroldi - Apr 17, 2021 at 7:46AM

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These moves will enable this credit card processor to emerge from the coronavirus stronger than ever.

The coronavirus has brought both tailwinds and headwinds to Mastercard's (MA 0.88%) global business. But because the market is forward-looking, its stock is up over 50% in the past 12 months, and given the company's recent moves, this is not too surprising. On a Fool Live episode recorded on March 31, contributor Brian Feroldi dives into this payment processor's steps to shore up its technology and come out of the pandemic even stronger.

Brian Feroldi: I'm going to talk about Mastercard, ticker symbol, M-A, beloved called "monster card" by many Fools. Mastercard, global payment network, you probably have one in your wallet right now. The big story for this company in 2020, was a tale of two opposites. Yes, it had the growth tale of e-commerce rising it's boat. However, a major segment for this company is cross-border fees. That's when you live in one country and spend in another. That's a major revenue generator for Mastercard. With global travel down, down, down, that category was just cut in half or even more. As a result of that, Mastercard's top line has been under pressure. While it is still ridiculously profitable, that has been a big hurdle for this company to overcome.

In the most recent quarter, its revenue was down 7%. It did de-lever a little bit, so its net income was down 15%. Its margins were still ridiculously strong across the board, but that will be something to watch moving forward. A couple of recent developments since this company reported earnings, they did say that they are expanding their Engage platform, which offers growing technology and fintech companies access to Mastercard's digital-first products and solutions. I really like that about this company. They are very forward-looking with saying, "Hey, here's an innovative growth company. Let's get them up and running with Mastercard's products in the early stages." They're really pushing forward with that.

They bought a company called Nets, which is a European paytech company that will "Support a broad set of account-to-account capabilities, bill payment and e-voicing applications in Europe." It's fairly common for Mastercard to make lots and lots of tuck-in acquisitions to build up its technology edge, so this looks to be just more of the same.

It also pledged to become a net-zero emissions company over the next couple of years and agreed to the Paris accord on its own. Finally, it partnered with a company called NMI and Global Payments to launch a cloud tap-on phone pilot programs. This company is really pushing forward with contactless solutions.

Moving forward, the name of the game is going to be how quickly does travel return and how quickly can cross-border fees are normalized. For what it's worth, Wall Street is expecting basically all-time high revenue this year and all-time high revenue next year. Right now, investors are pricing in a return of that growth.

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Mastercard Incorporated Stock Quote
Mastercard Incorporated
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