Mastercard Shares Tick Up as Revenue Outpaces Spending Growth

what happened

Mastercard shares edged up 0.20% to $636.97 at 12:35 p.m. ET on October 30, according to GuruFocus. The payments network reported a quarter in which consumer spending held up well.

Revenue climbed 14% to $9.8 billion. Gross dollar volume rose 7% in local currency, while cross-border volume increased 11%. Adjusted operating margin reached 60.5%, compared with 59.8% a year earlier. GuruFocus notes that the seven-point gap between revenue and spending growth cannot be credited entirely to pricing, since services, transaction mix and different measurement bases also play a role.

GuruFocus gives the company a GF Score of 98 out of 100 and a price-to-earnings ratio of 35.04.

why it matters

For markets, the key question is how much of cardholder spending Mastercard turns into operating profit, not just how much consumers spend. A high valuation suggests investors are paying a premium for business quality, which leaves less room for disappointment. Services growth, cross-border activity and margins will determine whether that premium holds if spending growth slows.

market impact

Payments sector: revenue and margin growth supports interest in Mastercard, but the high valuation limits the cushion.

• ↔Mastercard mixed — revenue and margin growth support the shares, but a high P/E leaves less room for disappointment

tags

instruments