One of the more prominent market-beating financial sector stocks this month has been payment processing giant Mastercard(NYSE: MA). That stands to reason: On Oct. 31, the company delivered a third-quarter earnings report showing solid growth and a double beat on analysts' estimates.
Speaking of Mastercard analysts, one Wall Street pro who covers the sturdy financial company recently upped his price target on the stock. Is his burst of fresh optimism justified?
Price target lift
On Friday, TD Cowen's Bryan Bergin slapped a new 12-month price target on Mastercard of $567 per share, well up from his previous assessment of $533 per share. He kept his buy recommendation on it intact.
That adjustment came just after Mastercard's annual investor day. According to his note, Bergin felt that the event confirmed the company's solid and sustainable growth prospects, which he feels will be reflected in double-digit percentage growth in key fundamentals from now through 2027. He also praised the variety of ways the company has found to draw revenue, a factor that buttresses his continued bullish view on it.
In that latest Mastercard research note, Bergin wrote that his new price target amounts to roughly 30 times the company's estimated forward P/E for 2026.
Winning the fight
Mastercard has been one of the great winners in the war on cash. As the smaller of the two leading card brands (No. 1 is Visa), it has been a long-term beneficiary of consumers' shift away from cash transactions to more modern methods like payment cards. That transition isn't going to end anytime soon, so Mastercard will almost certainly continue to grow despite its already impressive size.
In the third quarter, the company increased its net revenue by 13% year over year to $7.4 billion while raising its non-GAAP (adjusted) net income by nearly the same percentage to $3.6 billion. That resulted in a sky-high 49% profit margin. Even though the stock's valuations are a bit pricey, it's worth it for those kinds of growth figures.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard and Visa. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
