The MA Stock Forecast article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary:

• Governments around the world are still extending their quarantine/lockdown mandates. This is forcing many people to do costly cash advances on their Mastercard-issued credit cards.
• We conclude that the ongoing COVID-19 pandemic problem persists as a tailwind for MasterCard. There’s a surge in credit card usage when people are forcibly stuck-at-home.
• Online shopping and stay-home entertainment are the new normal. As one of the biggest credit card issuers, Mastercard certainly benefits from quarantine edicts.
• The current pandemic elevated the importance of owning credit cards like those issued by Mastercard. Aside from shopping, credit cards give easy access to quick, no-collateral loans via cash advances.
• No thanks to COVID-19, I expect Mastercard’s revenue growth for 2020 to beat the previous 5-year 12.35% CAGR.

I concur that Mastercard’s (MA) stock is trading at pricey valuation ratios. MA has a lower net income margin than Visa (V), 46.75% versus 52.26%. Visa has more outstanding credit cards issued than Mastercard, 1.15 billion versus 940 million. Visa also touts a higher dividend yield than Mastercard, 0.65% versus 0.54%. Despite Visa’s obvious advantages, investors still grant Mastercard’s stock higher TTM and forward P/E valuation ratios. Mastercard also boasts higher valuation ratios than American Express (AMEX). I cannot explain why. We just have to heed the prevailing emotion of the stock market.

The COVID-19 virus, SARS-CoV-2 is viciously mutating. There’s not going to be a universal cure for COVID-19 coming soon. The buoyant emotions over MA should still persist for many weeks to come. Buy more MA shares while the price is still below $300. I am giving MA a one-year price target of $310. Pandemics are terrible for many businesses. However, this COVID-19 pandemic is actually beneficial to credit card companies like Mastercard.

I’m highly confident that more than 900 million people are now being forced to use their Mastercard-branded credit cards more often. Since March, the stay-at-home, work-from-home, and the no-travel-through-mass-public-transportation edicts compelled people to spend more using their credit cards. Some of those 943 million people will incur interest charges and late payment penalties. It substantially benefits Mastercard whenever its customers cannot fully pay their monthly credit card bills.

We should buy more stocks of Mastercard because we know those 943 million Mastercard-issued credit card users will increase their spending while we remain in global pandemic conditions. Mastercard’s Q1 2020 revenue was only $4 billion. No thanks to COVID-19, Q2 revenue could hit $4.3 billion – $4.5 billion. Stronger quarterly revenue always leads to better-than-expected EPS.

Expect A Notable Surge In Credit Card Spending

Going forward, the cancellation of many domestic and foreign travels convinced me that billions of people now have huge unused credit card limits. Consequently, it benefits Mastercard when people are stuck at home and forced to use their credit cards to shop online and subscribe to paid streaming video/TV shows. NFLX, AMZN, and other streaming/e-commerce tickers are the fastest rebounders from the March Madness pandemic sell-off. This is because most people had no choice but to shop from home and work from home.

Doing marathon sessions of Netflix entertainment is now also the favorite hobby of billions of people. Mastercard benefits whenever more people are forced to subscribe to Hulu, HBO, Netflix, or Disney+ (DIS). MA is a buy when more people are doing mobile and online shopping.

People with the high remaining balance on their credit card limits are also like to become big-spending gamers. It’s no secret that in order for players to quickly advanced in free-to-play PC and mobile games is for them to use their credit card power. Spending hundreds of dollars can make people quickly ascend to the top of global player rankings.

The other boost to credit card usage is cash advances from hard-up customers. I am one of those Gold Mastercard owners who were forced to use the cash advance feature. The long queue lines in many Philippine banks mean I have no patience on attempting to withdraw from my passbook-only U.S. dollar accounts. What impressed me is Mastercard is also savvy when it comes to monetizing cash advance-using customers.

Study the screenshot image below, that’s my Gold Mastercard credit card issued by Bank of Philippine Islands. I took out a 50,000 peso cash advance (payable in six months and done only through the Credit-to-Account method) on May 5. By May 6, Mastercard is already demanding I must pay the first 8,963 pesos installment by May 25. This demand was done even though the 50k pesos cash advance I made was not yet even credited to my Mastercard debit card account at BPI.

You should really invest in Mastercard because it is very greedy when it comes to monetizing cash-strapped customers. I made a mistake by putting too much on dollar saving accounts and not enough on Philippine peso accounts. My bad. Mastercard is now fleecing me… me and all the hundreds of millions of people now forced to resort to cash advances on their credit cards.

Conclusion

The pandemic-induced surge in credit card spending (and cash advance usage) ultimately leads to better profitability. No thanks to COVID-19, I expect Mastercard to end 2020 with annual revenue of more than $16 billion. FY 2020 EPS will likely be $6.95. Multiply this EPS number by a forward P/E multiple of 45x and we get $312.75. This projection is just a tiny bit higher than my $310 one-year price target for MA.

The highly-paid experts at Wall Street also concur with my optimism over Mastercard. The average one-year PT for MA at TipRanks is $309.94. We should heed the wisdom of TipRanks-tracked analysts. MA remains a Strong Buy.

Lastly and most importantly, MA is a buy because the almost-infallible AI of I Know First gave Mastercard’s stock a very bullish one-year forecast score of 194.08.

Past Success With MA Stock Forecast

I Know First has been bullish on MA stock price in a past forecast. On May 23, 2019, the I Know First algorithm issued a bullish forecast for MA stock. The algorithm successfully forecasted the movement of Master Card’s shares. In almost one month, Master Card’s shares have risen by 6.65% in line with the I Know First algorithm’s forecast. See the chart below.

Here at I Know First, our AI-based algorithm has modeled and predicted assets price movement worldwide for short-term and long-term time horizons, ranging from 3 days to a year. Since 2011, we have been providing daily stock market predictions, as well as gold price predictions, forex forecasts, world indices predictions, and, in particular, Apple stock forecast. Today, we are producing daily forecasts for over 10,500 assets. These forecasts generated by our quant trading tool are used by institutional clients, as well as private investors and traders to identify the strong buy stocks in the market.

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