MasterCard: A financial toll road

A share buyback and a stake by Buffett are among the reasons to get charged up over this stock.

By TheStockAdvisors Nov 29, 2011 9:23AM

By Nicholas Vardy, Bull Market Alert

Serving approximately 22,000 financial institutions, think of MasterCard (MA) as a financial toll road, making its money on each of the transactions it processes. In doing so, MasterCard racks up $545 billion in transactions each year.

Even with the U.S. economy in the doldrums, MasterCard has been making a mint from the global trend toward a switch to cashless payments — whether using credit cards or debit cards.

And there is plenty of upside left. Almost nine out of 10 transactions across the globe still take place in cash. And that portion is now even lower in fast-developing markets in Asia, the Middle East and Latin America.

Yet if its current pace of growth continues, China will overtake the United States as the world's largest credit card market by the end of the decade.

 

Post continues below:

In a sign of things to come, MasterCard is also partnering with Google, Intel and Citigroup to offer smartphone-based transactions through MasterCard's PayPass payment technology.

When consumers use the new system, they will be able to pay for online purchases with a simple tap of their PayPass-enabled card, tag or smartphone on an Ultrabook device.

With online sales reaching $176.2 billion last year in the United States alone, the potential for this technology is vast.

The company recently reported a 38% jump in third-quarter profit and a 27% jump in revenue as spending and transactions made with its credit and debit cards increased. MasterCard is projected to grow earnings by 19.6% next year.

No wonder MasterCard has attracted the attention of Warren Buffett, who recently boosted Berkshire Hathaway's stake in the company.

MasterCard also recently announced that it is buying back roughly 5% of its shares outstanding -- a sure sign of confidence by senior management.

Barclays Capital has a price target of $410.00 on shares of MasterCard. But with the tailwind of U.S. economic recovery behind it, I think it will go much higher than that.

Related articles:

Tags: MA
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

125
125 rated 1
267
267 rated 2
455
455 rated 3
612
612 rated 4
682
682 rated 5
695
695 rated 6
632
632 rated 7
472
472 rated 8
279
279 rated 9
147
147 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
VZVERIZON COMMUNICATIONS9
TAT&T Inc9
CTLCENTURYLINK Inc8
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.