Payments giant Mastercard Incorporated MA reported strong fourth-quarter 2024 results, driven by increased gross dollar volume, cross-border transactions and demand for value-added services. The company’s growing expertise in AI, largely built in-house, is enhancing its business mix.

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Investors have responded positively, pushing MA stock up 3% since the impressive earnings, bringing it close to its 52-week high of $576.94. With shares near record levels, the key question is: Should investors take profits, or does Mastercard have more room to grow?

3 Major Takeaways From Mastercard’s Q4 Earnings

Earnings & Sales Beat: Mastercard’s EPS of $3.82 beat the Zacks Consensus Estimate by 3.8% and grew 20% year over year. Also, the top line of $7.5 billion beat the consensus mark by 1.4% and improved 14% from a year ago. For a detailed analysis, read our blog: Mastercard Q4 Earnings Beat Estimates on GDV & Transactions Growth.

Major Metrics Continue to Rise: MA’s gross dollar volume grew 12% year over year on a local-currency basis to $2.6 trillion and met the Zacks Consensus Estimate. On a local currency basis, the cross-border volume climbed 20% year over year in the quarter under review. Also, its switched transactions grew 11% year over year.

Growing Services Business: Mastercard is investing heavily to meet the growing demand for its service offerings like cybersecurity and data analytics, facilitating its diversification efforts. In the fourth quarter, these services contributed 41% of total net revenues, with value-added services generating $3.1 billion, up 16% year over year. This growth was fueled by increasing demand for consumer acquisition, engagement, and business and market insights.

The company’s security, digital authentication and pricing strategies continue to strengthen this segment. Mastercard’s business model functions as a data-driven cycle, where network transactions generate valuable insights that power cybersecurity solutions and targeted marketing services. Its AI capabilities, bolstered by the Brighterion acquisition in 2017, play a crucial role in preventing cyber threats and enhancing data-based marketing strategies to improve ad targeting for clients.

Mastercard's Long-term Growth Drivers

Mastercard’s expansion in emerging markets, particularly in Southeast Asia and Latin America, positions it for long-term growth. These efforts are helping offset revenue lost from its exit from Russia. With millions of underbanked consumers in these regions, Mastercard has a significant opportunity to grow its global footprint.

The shift toward digital payments remains a powerful tailwind. As economies transition away from cash, Mastercard is capitalizing on the trend by leveraging its extensive global network and growing service offerings. The company’s strong cash reserves allow it to fund organic growth and strategic acquisitions, ensuring continued expansion in the evolving payments landscape. Its investments in AI, fraud prevention and digital solutions will strengthen its position as a leader in the space.

Mastercard’s Commitment to Shareholders

Mastercard remains committed to returning capital to shareholders backed by its cash-generating abilities. In 2024, the company repurchased 23 million shares worth $11 billion and paid $2.4 billion in dividends. During the fourth quarter alone, dividend payouts totaled $606 million. It still has $14.5 billion in remaining share buyback authorization as of Jan. 27, 2025. It generated cash flows from operations of $14.8 billion in 2024, up from $12 billion a year ago.

Mastercard’s Strong Estimates for 2025 & 2026

The Zacks Consensus Estimate for Mastercard’s 2025 and 2026 EPS implies a 9.5% and 16.9% uptick, respectively, on a year-over-year basis. The earnings estimates remained stable over the past week. Also, the consensus mark for 2025 and 2026 revenues suggests a 12.1% and 12.5% increase, respectively.

The company beat earnings estimates in each of the past four quarters, with an average of 3.3%. This is depicted in the figure below.

MA’s Challenges & Risks

Despite its strong position, investors should keep an eye on its headwinds:

Adjusted operating expenses have increased consistently, 10.7% in 2022, 10.5% in 2023 and 11% in 2024. Additionally, rebates and incentives (a contra-revenue item) rose 16.1% year over year in 2024, putting pressure on net revenue growth.

The company also faces legal and regulatory challenges. Last December, Mastercard settled a major London lawsuit related to card fees, while earlier this year, it resolved a pay bias lawsuit, agreeing to conduct pay audits and review its career advancement policies. These legal expenses could add to costs and affect its brand reputation.

A key regulatory risk is the Credit Card Competition Act of 2023, aimed at reducing merchant fees and increasing competition in the payments industry. If passed, it could threaten Mastercard’s and its bigger rival Visa Inc.’s V duopoly in the United States, potentially slowing revenue growth in a key market. The potential impact of the ongoing shift in political dynamics in the payments space will likely become clearer in the coming months.

Mastercard’s Price Performance & Valuation

Mastercard stock has gained 23.2% over the past year, underperforming the industry’s 26.1% growth. Competitors Visa (+27.6%) and American Express AXP (+46.1%) have outperformed Mastercard. Meanwhile, the S&P 500 has gained 20.9% in the same period.

One-Year Price Performance Comparison – MA, V, AXP, Industry & S&P 500

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From a valuation perspective, Mastercard is trading at a forward P/E ratio of 34.72X, higher than its five-year median of 31.67X and well above the industry average of 26.02X. In comparison, Visa trades at 29.77X and American Express at 19.91X. Mastercard’s premium valuation raises overvaluation concerns, especially as it trades near its 52-week high. 

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Final Verdict: Hold Mastercard Stock for Now

Mastercard remains a strong long-term investment due to its global presence, digital payment growth, and AI-driven innovations. However, with rising costs, regulatory uncertainties and a premium valuation, the stock’s near-term upside may be limited.

For current investors, holding the stock makes sense, given its steady earnings growth and shareholder rewards. However, new investors may want to wait for a better entry point before buying. Mastercard currently has a Zacks Rank #3 (Hold), reflecting a neutral outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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