Mastercard has seen good growth lately, but the conservative growth forecast till 2027 does not depict an impressive picture for investors. With restrained growth goals and an elevated valuation, it might not be the best choice for those in quest of substantial growth.
Mastercard Incorporated is an electronic payment processing service company operating in almost all parts of the world. Headquartered in Purchase, New York, Mastercard is among the very few electronic payment processing services companies with a multinational network that enables consumers, merchants, and financial institutions to execute safe and efficient electronic payments.
A businessman at a smart POS terminal, demonstrating contactless payment methods.
The major offerings of Mastercard include payment services in credit, debit, and prepaid cards, digital payment solutions, and fraud prevention services. The powerhouse earns through transaction fees paid on payments made through its network and value-added services such as loyalty programs and consulting.
Mastercard’s customer base includes financial institutions, merchants, governments, and businesses in a variety of industries. The company is supporting over 210 countries worldwide by shaping the future of electronic payments through innovation in the global financial technology space.
Mastercard has had a good run, with impressive growth in 2023 and 2024, driven by strong consumer spending and demand for its services. But here’s the catch: its new growth targets through 2027 aim for a rather modest “high end of low double digits” CAGR. That’s a step down from the high-teen growth rates investors once cheered for.
Add this slower trajectory to a rich 31x forward earnings valuation, and Mastercard starts to look more like a pricey safe bet than a high-flying one. Operating margins are steady at 55-57%, but without much room to grow, it’s hard to justify the premium.
The company is making aggressive plays in cybersecurity and digital payments with an addressable market of $154 billion with high-teens growth. Sounds great, but there’s a catch. While these initiatives are exciting in their own right, they are still tiny relative to the company’s total revenues and don’t contribute much at present. Moreover, with the growth in EPS slowing from where the company started, the appetite of growth investors may well remain unsated by this vision.
Mastercard is stable and reliable, but less appealing for growth-focused investors in light of slowing growth and high valuation. With no major catalysts on the horizon, the stock may not deliver the rapid returns that many seek in a high-growth investment.
Mastercard is 11th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 131 hedge fund portfolios held MA at the end of the second quarter which was 142 in the previous quarter. While we acknowledge the potential of MA as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as MA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
