NEW DIRECTIONAL CALL PLAYS
MasterCard Inc. - MA - close: 92.81 change: +1.10
Stop Loss: 89.85
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 5.0 million
Entry on March -- at $---.--
Listed on March 05, 2015
Time Frame: Exit prior to April option expiration
New Positions: Yes, see below
Why We Like It:
Do you have a credit card? How about a debit card? Odds are you do. About 70% of Americans have a credit card and many have more than one. Inside the United States there are over 500 million credit cards between American Express, MA, and Visa. There's more than 1.12 billion globally (not counting the U.S.). There's also another 572 million MA or Visa debit cards in the U.S. (MasterCard has more than 144 million). Not counting America there are more than 1.2 billion debit cards around the world.
Now what if you could charge a small percentage for consumers using their plastic every time they make a purchase? That's MA's business model. As of 2013 their market share of global transactions (credit or debit) was about 27%. They are the second biggest credit and debit card company behind Visa (V).
According to the company, "MasterCard (MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world's fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard's products and solutions make everyday commerce activities â€“ such as shopping, traveling, running a business and managing finances â€“ easier, more secure and more efficient for everyone."
MA has been delivering steady growth. They reported their Q3 results on October 30th with earnings up +19% from a year ago to $0.87 a share. That beat estimates. Revenues were up +12.8% to $2.5 billion, also above expectations. The bullish trend continued when MA reported its 2014 Q4 results on January 30th. Earnings per share soared +32% from a year ago to $0.69 and revenues grew +13.6% to $2.42 billion. Both metrics were above Wall Street expectations.
The company did warn that the surge in the U.S. dollar was impacting results but they still see strong single-digit revenue growth for 2015. They reaffirmed +20% earnings growth.
Meanwhile one of MA's biggest rivals, American Express (AXP), is not having a good year. AXP lost its exclusive deal with Costco (COST) last month. This deal generated 20% of AXP's loans and about 10% of their annual card growth. AXP is also losing its partnership with JetBlue (JBLU). AXP's losses will likely be MA's and Visa's gain.
This week MA announced it had signed a 10-year deal with Citigroup. Not only is Citigroup one of the biggest banks on the planet they are the largest credit card issuer in the world. The press release states "Citi will begin aligning the company's consumer proprietary credit and debit portfolios to the MasterCard network in 2015."
One analyst has already opined that the deal should provide a "decent tailwind for EPS growth" (for MA). Speaking of opinions, a couple of analysts at Nomura believe that MA is cheap at current valuations and could be seen as safe haven investment given their steady earnings growth.
Technically shares of MA broke out past resistance at $90.00 during the market's widespread rally in February. The stock has already retested $90.00 as new support. Odds are good MA is poised to make a run towards the $100 level. Currently the point & figure chart is bullish and forecasting a long-term target at $118.00.
Today MA sits just below last week's high of $93.00. We are suggesting a trigger to buy calls at $93.15.
Trigger @ $93.15
- Suggested Positions -
Buy the Apr $95 CALL (MA150417C95) current ask $1.50
Option Format: symbol-year-month-day-call-strike