Ricardo Pillai
Mon, Jun 9, 2025, 6:25 AM 3 min read
In This Article:
We came across a bullish thesis on Mastercard Incorporated (MA) on Incremental Returns’ Substack. In this article, we will summarize the bulls’ thesis on MA. Mastercard Incorporated (MA)’s share was trading at $585.60 as of 30th May. MA’s trailing and forward P/E were 41.07 and 36.76 respectively according to Yahoo Finance.
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Mastercard benefits from powerful competitive advantages that have cemented its position as one half of the global payments duopoly alongside Visa. Its multi-party network connects consumers, merchants, and financial institutions, creating strong network effects that increase with scale.
With over $8 trillion in annual purchase transactions and deep relationships across the financial ecosystem, Mastercard has built high barriers to entry and significant switching costs. Its scale drives operational leverage, reflected in operating margins above 58%. Mastercard is well-positioned to capitalize on long-term secular trends, particularly the global shift from cash to digital payments and the ongoing growth of e-commerce.
These trends expand transaction volume and revenue per transaction, especially through higher-margin cross-border and card-not-present purchases. Additionally, Mastercard benefits from the rise of digital wallets and Buy Now, Pay Later (BNPL) solutions, which rely on its infrastructure and generate higher transaction values and processing fees. The company is also targeting the $120 trillion B2B payments market, where digitization offers efficiency, fraud protection, and working capital benefits.
Mastercard’s fast-growing Value Added Services segment—comprising cybersecurity, analytics, and loyalty tools—deepens customer relationships, raises switching costs, and diversifies revenue. Risks include regulatory scrutiny of interchange fees, pressure from large merchants seeking lower costs, and the emergence of real-time payment networks (RTPNs). However, Mastercard is actively integrating with RTPNs through acquisitions like Vocalink and leveraging its MOVE platform for cross-border real-time payments.
Overall, Mastercard’s entrenched network, strategic positioning, and exposure to global payment trends support a strong long-term investment case despite regulatory and technological headwinds.
Previously, we have covered MA in February 2025 wherein we summarized a bullish thesis by Chit Chat Stocks on Substack. Mastercard reported strong Q4 2024 results with 12% volume growth and a 6% increase in cards in circulation, demonstrating its durable competitive advantages and leadership in global payments. The company had delivered a 29.9% total return CAGR since its 2006 IPO, highlighting its resilience and long-term potential despite occasional high valuations. Since our last coverage, the stock is up 4% as of 30th May.
