Risk/Reward Rating: Negative
Mastercard suffered an unusual year in 2020 as sales were hit hard by the COVID lockdowns. Meager revenue growth of 2% ex currency impacts returned in Q1 2021. Making matters worse, the forecast for Q2 2021 calls for revenue to be unchanged from that of Q2 2019 excluding the impact of acquisitions. This lack of organic growth is not what one would expect from a mega-cap company trading at an extreme valuation.
Valuation: 47x 2021 earnings estimates and 35x 2022 estimates. The company trades at an extraordinary 24x 2020 sales and 22x 2019 sales. While Mastercard has commanded a powerful market position historically, leading to a large valuation premium, this seems less likely going forward given the intense competition forming.
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