Mastercard Inc "Management meeting takeaways" (Buy) Chiodo

Research evidence excerpt

Mastercard Inc "Management meeting takeaways" (Buy) Chiodo

Forecast returns

Forecast price appreciation 29.4%

Forecast dividend yield 0.8%

Forecast stock return 30.2%

Market return assumption 9.1%

Forecast excess return 21.1%

Company Description

Mastercard, Inc. is a global payment solutions company that provides a variety of services in

support of credit, debit, and related payment programs of financial institutions. The company

offers transaction processing services for credit and debit cards, along with additional non-

card-based payments. The company's core business is focused on C2B payments, although it

also offers exposure to B2B and additional non-PCE payment flow, alongside faster-growth,

value-added services business.

Valuation Method and Risk Statement

Risks to our investment thesis: 1) Macro-related, in particular as it relates to consumer

spending (credit business more exposure to consumer discretionary trends); 2) Regulatory,

although at times more related to interchange-related caps (fees earned by bank issuers vs.

network fees earned by the card networks); 3) Cross-border (travel & eCommerce) trends

given outsized yields vs. domestic transactions; 4) M&A integration and execution, given a

track record of bolt-on acquisition (capability and/or service additions); and 5) FX-related,

both in the form of transaction (given meaningful international exposure) and exposure to

volatility (elevated FX spreads earned during periods of higher currency volatility). Our

valuation methodology is based on price to earnings.

Capital One Financial Corp:

We arrive at our price target for COF by applying a multiple on our '26/27E EPS. This

component of our analysis is weighted 50%. The other 50% of our framework comprises of

our fair value targets on P/TBV.