Mastercard to get a major boost from the shift towards digital payments

Mastercard (MA) stock has been on an upswing lately and touched a new 52-week high of $194.72 on Monday, up 65% from last year. An increasing shift towards a card economy has been cited as the primary reason for this growth. So is that an indication of continued growth?

Mastercard and its rival Visa (V) fared well in the previous quarter as more consumers used cards to make purchases. For the first quarter, Mastercard’s payment network services aided in recognizing revenue from domestic assessments and transaction processing. Most of the company’s revenue came from outside the US helped by a weaker dollar.

Higher net income adjusted for non-cash items and lower customer sign-on payments drove net cash provided by operating activities higher by 42.4%. Meanwhile, an increase in net proceeds from investment securities dragged net cash provided by investing activities higher. Proceeds from the issuance of debt helped the company use less cash in financing activities.

The company’s current assets have risen 6.6% while current liabilities have increased 1.8%. Total stockholders’ equity grew by 4.3% helped by an increase in retained earnings.

The stock has been faring reasonably well for shareholders, by paying dividends and repurchasing stocks at regular intervals. The company plans to continue paying a quarterly cash dividend on both outstanding Class A and Class B common stock of $0.25 per share each. In December 2017, the board of directors had approved a share repurchase program authorizing to buyback up to $4 billion of Class A common stock.

On recommendation trends, 29 out of 36 analysts are expecting a “strong buy” or “buy” rating while six analysts are predicting a “hold” rating. On growth estimates front, market analysts are expecting a 38.20% jump during the current year and 16.70% during next year. For the next five years, a 21.48% growth per annum is projected by the consensus.

Zacks Investment Research remains bullish on the company’s stock and expects that it is poised to benefit further from the secular shift toward digital payments helped by its leadership position in the payments markets, continued innovation, and investments in technology.

The future of Mastercard is evident from the strong card volume numbers reported by the big banks, though foreign exchange tends to play its game.