Mastercard (NYSE:MA) isn’t the first company most people think of when they think of e-commerce and e-payment systems. Usually, Mastercard stock is viewed as a blue-chip credit card company. That is certainly where a lion’s share of its revenue comes from.
However, in the world where PayPal (NASDAQ:PYPL) and Square (NYSE:SQ) exist, with peer-to-peer services popping up like wildflowers after a spring rain, MA stock kind of gives off the impression of being a last-generation payment solution firms.
Granted, MA has been around since go-go boots and the Apollo moon landings (1966), so it certainly doesn’t have that millennial vibe. And its $220 billion market cap certainly screams “Oldster” when compared to the newer firms looking to be its successor.
But the fact is, no one is questioning if Mastercard stock is valuable. Quite the contrary, some are wondering if, after an impressive 44% run year to date and a 50% run in the past 12 months, whether MA stock is overvalued at this point.
The answer: MA is just getting started.
Mastercard Stock Holds a Host of Advantages
Mastercard stock has a couple significant advantages in this space that the upstarts like PYPL and SQ can only dream about.
First is scale, both globally and asset-wise. Because MA was one of only a handful of major credit cards for decades, it has established itself and its brand all around the world. This is extremely important when you’re talking about a company that is working with customers’ money.
On the asset side, over this time it has built a network of large financial institutions as well as large retailers that have come to rely on their relationship with MA. These are major players in the global economy. Gaining access to them now is much more difficult row to hoe than it was when there were only a handful of options for banks and stores to work with.
Remember, working with a payment solutions company is far more complex than just issuing plastic credit and debit cards that bill to an account. There are a lot of operations on the regulatory, security and marketing fronts that are involved in creating a seamless and valuable experience both for the issuing bank as well as the customer.
The second key asset is the fact that at its size and with its big customer base, it has competitive advantages for the new generation of cashless and mobile payment businesses that are cropping up.
MA is currently focused on the SaaS (software as a service) component of its business model now and wants to make this a key part of its revenue moving forward. It can compete with new firms when it comes to transaction fees and integrating its systems into large and enterprise level companies.
PYPL and SQ may get lots of small businesses, farmer’s market merchants and the early adopters to P2P payments, but MA is landing deals that will scoop up orders of magnitude more users (and fees).
Granted, it’s not cheap here, but it can back its pricing with a lot of growth to come.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
