Mastercard Stock Lags Behind Competitors on Friday
AInvestSaturday, Feb 1, 2025 7:06 am ET
5min read
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As an investor, I've always been drawn to Mastercard (MA) for its strong brand, wide moat, and consistent growth. However, on Friday, February 1, 2025, Mastercard's stock underperformed compared to its competitors. Let's dive into the factors contributing to this underperformance and explore the implications for long-term investors.



Mastercard's underperformance can be attributed to several factors:

1. Analyst Ratings: While the average analyst rating for Mastercard stock is "Buy", indicating a positive outlook, the stock price forecast has a lower average target of $598.92 compared to its competitors. For instance, Visa has an average target price of $670, which is higher than Mastercard's.
2. Revenue Growth: Mastercard's revenue growth rate is lower than that of its competitors. According to the provided data, Mastercard's revenue is forecast to grow at a rate of 9.96% per year, which is lower than the US Credit Services industry average of 10.03% and the US market average of 9.85%.
3. Earnings Growth: Mastercard's earnings growth rate is also lower than that of its competitors. The company's earnings are forecast to grow at a rate of 13.59% per year, which is lower than the US Credit Services industry average of 13.27% and the US market average of 18.46%.
4. Valuation: Mastercard's stock is currently trading at about 32 times expected forward earnings, which is higher than Visa's valuation of 28 times forward earnings. This premium valuation could limit Mastercard's capacity for near-term gains.
5. Regulatory Pressure: Mastercard and Visa face pressure from merchant groups and government regulators to reduce their swipe fees. In June 2024, a U.S. judge rejected a settlement between Mastercard, Visa, and several merchant groups, which implies that the companies might need to reduce their swipe fees even more to avoid facing action by antitrust regulators. This regulatory pressure could weigh on Mastercard's stock performance.



These factors, combined with the broader market conditions and investor sentiment, may have contributed to Mastercard's underperformance compared to its competitors on Friday. However, it's essential to consider the company's strategic initiatives and acquisitions to assess its long-term prospects.

Mastercard has undertaken several strategic initiatives and acquisitions in recent years to drive growth and maintain its competitive edge. Some key examples include:

1. Dynamic Yield acquisition (2021): Mastercard acquired Dynamic Yield, a personalization technology company, to expand its services offerings and create a unified consumer engagement and loyalty hub for both merchants and financial institutions. This acquisition allowed Mastercard to enhance the value of payments and deliver greater trust and more meaningful relationships with customers.
2. Aiia acquisition (2021): Mastercard acquired Aiia, a European open banking platform, to strengthen its API connectivity with European banks and complement its comprehensive footprint in North America. This acquisition enabled Mastercard to help customers activate their financial data to solve real challenges and offered progress in digital identity verification services.
3. Recorded Future acquisition (2023): Mastercard agreed to acquire Recorded Future, a threat intelligence company, to enhance its security and anti-fraud capabilities. This acquisition will help Mastercard better protect its customers and further strengthen its higher-growth services division.
4. Minna Technologies acquisition (2023): Mastercard acquired Minna Technologies, a subscription management start-up, to expand its offerings in the subscription and recurring payments space. This acquisition will enable Mastercard to provide more comprehensive payment solutions for merchants and consumers.

Mastercard's stock performance has been strong relative to its competitors, such as Visa (V) and American Express (AXP), over the past few years. As of February 1, 2025, Mastercard's stock price is around $555.43, up over 40% from its level in early 2022. In comparison, Visa's stock price has increased by around 30% during the same period, while American Express's stock price has risen by approximately 25%. Mastercard's strategic initiatives and acquisitions have contributed to its strong stock performance, as they have helped the company maintain its competitive advantage and drive growth in a rapidly evolving payments landscape.

In conclusion, Mastercard's underperformance on Friday can be attributed to several factors, including analyst ratings, revenue and earnings growth, valuation, and regulatory pressure. However, the company's strategic initiatives and acquisitions have contributed to its strong stock performance over the past few years. Long-term investors should monitor Mastercard's performance and management's outlook for any signs of deceleration or acceleration in growth. Additionally, investors should be aware of potential challenges Mastercard may face, such as regulatory pressure on swipe fees and competition from newer "buy now, pay later" platforms like Affirm. These factors could impact Mastercard's growth and valuation in the long term.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.