MasterCard’s Astonishing Growth

MasterCard Inc. (NYSE: MA) is experiencing astonishing growth. Stockrow estimates MasterCard’s revenues grew by 35.77% in the quarter ending on 30 June 2021.

In contrast, MasterCard’s revenues fell by -18.92% in the quarter ending on 30 June 2020 and grew by 3.64% in the quarter ending on 30 June 2021. In depth, MasterCard’s quarterly revenues and quarterly gross profit grew from $3.335 billion on 30 June 2020 to $4.528 billion on 30 June 2021.

Additionally, MasterCard’s quarterly operating income grew from $1.707 billion on 30 June 2020 to $2.341 billion. Thus, MasterCard is growing and making more money at the end of the pandemic year.

How Much Cash Does MasterCard Generate?

MasterCard’s payments platform is generating more cash. For example, MasterCard’s quarterly operating cash flow grew from $1.634 billion on 30 June 2020 to $2.268 billion on 30 June 2021.

Conversely, the quarterly ending cash flow fell from $969 million on 30 June 2020 to -$992 million on 30 June 2021. However, I think the quarterly negative cash flow came from the -$2.194 billion quarterly negative financing cash flow on 30 June 2021.

I think that negative cash comes from MasterCard’s repayment of the $2.1 billion financing cash flow reported on 31 March 2021. Conversely, MasterCard’s total debt grew from $12.498 billion on 30 June 2020 to $13.399 billion on 30 June 2021.

In contrast, MasterCard’s cash and short-term investments fell from $12.144 billion on 30 June 2020 to $7.356 billion on 30 June 2021. Thus, MasterCard (MA) finished the pandemic with more debt and less cash.

What Value does MasterCard have?

MasterCard (NYSE: MA) did gain value during the pandemic. Its total assets grew from $32.127 billion on 30 June 2020 to $34.911 billion on 30 June 2021.

Importantly, MasterCard’s customer base grew during the pandemic. For instance, the number of MasterCard credit cards worldwide grew from 948 million in the first quarter of 2020 to 974 million in the first quarter of 2021, Statista estimates.

Similarly, the number of MasterCard credit cards in the United grew from 242 million in the first quarter of 2020 to 249 million in the first quarter of 2021.

Hence, I estimate. MasterCard added 26 million new credit card customers during the pandemic. Therefore, MasterCard I consider MasterCard a pandemic-proof business.

Why did MasterCard Grow during the Pandemic?

So why did MasterCard (MA) grow during the pandemic? I think the pandemic drove credit card growth in two ways.

First, retail e-commerce sales exploded during the pandemic. For example, Insider Intelligence estimates US retail e-commerce sales grew by 33.6% in 2020. Overall, US retail e-commerce sales rose from $598.02 billion in 2019 to $799.18 billion in 2020.

Insider Intelligence projects US retail e-commerce sales will rise to $908.73 billion in 2021, $1.045 trillion in 2022, and $1.192 trillion in 2023. Hence, MasterCard’s future looks bright.

Is MasterCard Pandemic Proof?

I think growing e-commerce drives credit card sales because you have to pay electronically online. In addition, many people want the extra security credit card purchases add when they pay online.

Second, some people are afraid that paper cash and checks could spread the coronavirus. To avoid COVID-19, those people will swipe a card or use mobile payment apps such as Apple Pay or GPay (formerly Google Pay). Both mobile payment and swiping a card limit physical contact and potential exposure to COVID-19.

Notably, MasterCard’s revenue growth occurred in the quarter after COVID-19 vaccines became widely available in the United States. The second quarter ending on 30 June 2021. Hence, the pandemic did hurt MasterCard’s business.

Thus, I think MasterCard (MA) is vulnerable to pandemics but pandemics can increase demand for some of its some services. For example, people eat out less during the pandemic but they use their plastic to pay for DoorDash and GrubHub (GRUB) meal delivery.

Is MasterCard a good stock?

One person who has faith in MasterCard (NYSE: MA) is Mr. Market. Notably, Mr. Market paid $312.59 for MasterCard on 3 August 2020 and $368.01 on 4 August 2021.

Thus, Mr. Market’s share price grew by $55.42 in a little over a year. Hence, I consider MasterCard a growth stock. However, I think Mr. Market overprices MasterCard.

Yet MasterCard has some attractive features, including a high margin of safety and a significant dividend. MasterCard will pay a 44¢ quarterly dividend on 9 August 2021. That quarterly dividend grew from 40¢ on 8 October 2020. Overall, each MasterCard share offered a forward annualized dividend of $1.76 and a 0.47% dividend yield on 4 August 2021.  

I think MasterCard is a value investment in finance and Fintech. However, I advise investors to avoid MasterCard until Mr. Market puts a realistic price on it.