MasterCard (MA), the global payments and technology company that connects consumers, financial institutions, merchants, governments and businesses worldwide, enabling them to use electronic forms of payment instead of cash and checks, has seen its share price rise a solid 26.7% year-to-date, and the stock isn’t overly expensive when looking at the valuation multiples.
MasterCard shares have pulled-back from a share price of about $655 after their earnings report at the end of July. They also suffered a similar fate to other stocks this week due to the threat of war, but are back on-the-road to recovering these losses.
They are the third-highest priced stock on the S&P 500, rising 47% over the past 12 months, and with continued progressive reporting as well as a host of advancements, will likely put the stock squarely within range of $1,000.
There is definitely a lot happening for MasterCard. Here are the highlights of the bullish case for the stock.
Positive Earnings Report
MA saw a better-than-expected 21% rise in quarterly profit as more people used cards to make payments, compared to other providers.
Net income rose to $848 million (560.4 million pounds), or $6.96 per share, in the second quarter, from $700 million, or $5.55 per share, a year earlier.
Strategic Partnerships in Foreign Markets
Just this week, Mastercard has made several important moves to establish its brand in markets where it has a lot of room to grow.
MasterCard and Standard Bank Group, Johannesburg-headquartered bank in Africa, have signed an agreement for another five years, which will expand the remit of MasterCard across the African emerging markets where Standard Bank is present and leverages the use of several MasterCard products and services there, including MasterCard Advisors, the business consulting arm of the company.
Mastercard also recently partnered with Mashreq Bank and Swiff to revolutionize payment acceptance in the United Arab Emirates with ‘Payport,’ an app that allows users to swipe payments on smartphones. The aim is to target businesses that are dependent on cash to facilitate home deliveries or many other similar business segments.
In order to provide MasterCard cardholders with priceless experiences in the world’s most exciting destinations, MasterCard is launching Priceless Aruba, in partnership with the Ministry of Tourism and the Tourism Authority of Aruba. Aruba is the fifth city in the Caribbean to join MasterCard’s Priceless Cities program.
Mobile Wallet Services
MasterCard will soon introduce a contemporary mobile wallet service in Japan, which is based on near-field communication (NFC). The company will launch this service by integrating its next generation digital service – PayPass – with DNP’s mobile wallet and C-SAM’s secure turnkey mobile transaction software technology services.
This digital service platform is a quick, secure and simple way to handle checkout services.
Qantas and MasterCard this week released the new Qantas Frequent Flyer membership card, expanding its uses to include storing foreign currency, accessing cash worldwide via ATM withdrawals, and earning points on spending in Australia and overseas.
Follow the Smart Money
Hedge funds are very bullish on MasterCard, as realized with a total of 72 of the hedge funds holding long positions in this stock, a change of 6% from the previous quarter. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably – such as Harris Associates, with a $1.3187 billion position in the stock, comprising 2.8% of its 13F portfolio — Gardner Russo & Gardner, managed by Tom Russo, which held a $563 million position; the fund has 6.6% of its 13F portfolio invested in the stock, as well as others.
Stock analysts are also very bullish on MasterCard – the most recent is a “buy” rating from TheStreet – also Keefe, Bruyette & Woods raised their price target from $691.00 to $749.00.
Therefore, with all this positive activity, a great earnings report and many other apparent strengths, such can be seen in multiple areas — revenue growth, impressive record of earnings per share growth, compelling growth in net income, expanding profit margins and good cash flow from operations — a situation has arisen, along with a favorable pullback entry price, to incorporate this call options play into the trading portfolio.
OPTIONS TRADE: Buy the MA Jan 2014 700.000 call (MA140118C00700000) at or under $6.00, good for the day. Place a protective stop limit at $2.40 and a pre-determined sell at $9.50.