KBW Shines New Light on Mastercard Performance

February 6, 2019         By: Steven Anderson

We recently heard out of KBW its stances on PayPal and Visa, but what about Mastercard? Apparently, Mastercard’s recent developments were of sufficient note to merit its own separate report, a copy of which it sent our way. The news was actually quite good, and as a result, KBW has a whole new take on Mastercard’s short-term fortunes.

The centerpiece of the report, based around information given during its fourth-quarter 2018 earnings call, is that optimism rules the day out there, with three-year performance objectives and expectations for 2019 surprisingly high. Indeed, these factors suggest that the basic trends in Mastercard’s field of view are solid and built around solid fundamentals. As a result, KBW increased its own estimates for the near term in Mastercard.

KBW’s report pointed out that the macro backdrop worldwide is looking generally favorable. The United States, one of Mastercard’s biggest markets, is experiencing low unemployment, solid consumer confidence, and even brisk retail sales, though not quite what some had expected. That’s a recipe for solid economic growth, the kind where credit cards are put to work routinely. Europe is a bit of a mixed bag, with the UK looking sound and some like France and Spain looking less so. Recent election turmoil in Brazil and Mexico has passed in Latin America, and the Chinese economy would be a problem, if Mastercard had much of a presence in the Chinese economy, which it does not.

New markets and partnerships are also giving Mastercard some help, with co-branding agreements and new pushes in Mexico and even China. Plus, Mastercard has been working the business-to-business (B2B) side of things a little more lately, and that should help provide new revenue streams to help moderate the impact of slowdown in the consumer market.

Thus, Mastercard is effectively making hay while the sun shines, and that’s a good stance to be in. Indeed, the consumer economy is looking pretty solid right now, and that’s a great time to start branching out into other markets thanks to that secure backstop. The positive consumer economy won’t last forever—it never does—and that’s when Mastercard will want alternate revenue streams kicking in.

That diversification adds up to a solid future for Mastercard, and every reason for KBW to hike its estimates.