Mastercard Q4 and FY 2023 Update

Watch List stock Mastercard (MA) reported their fourth quarter and fiscal year results late last week.

Results continue to look strong. In the fourth quarter, revenue increased 12%, with strong volume (number of transactions) increases in cross border (+31%) and overall switched transactions (+8%). CEO Michael Miebach noted continued strong consumer spending, even in the face of economic and geopolitical concerns across the globe. As we've noted before, the strong U.S. dollar continues to make growth figures look weaker than they actually are. When accounting for currency effects, Mastercard's Q4 revenue growth was even more impressive at 17%.

2022 represented a full "bounce back" year for Mastercard after COVID-related weakness in 2021 and particularly 2020. For the year, revenues grew 18%, 23% on a currency neutral basis, with cross border volume increasing 45% and overall transactions up 12%.

Looking forward, things still look good for Mastercard. The return of cross border travel, which saw 59% volume increases in Q4, continues to be a tailwind. Also, Mastercard sees the re-opening of China and other Asian countries that follow its lead as another boon to payment volumes. Our expectations of about 10-11% average annual growth over the next 5 years still look achievable. Incorporating Mastercard's aggressive buybacks, dividend hike, and time value of money increases, I'm raising the fair value price to $423 from $373. We will continue to watch for a good buy-in point.