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Time For a Reality Check: Mastercard Incorporated (MA)

One of the companies that will benefit from the revival of international travel is Mastercard Incorporated (NYSE: MA), which issues and services plastic cards.

Mastercard makes most of its money by handling internal transactions and charging a commission to each financial institution that provides cards under the Mastercard brand. However, purchases outside the cardholder’s home nation account for a significant portion of the company’s revenue.

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Mastercard earns a commission from the cardholder for an international transaction, a cross-border fee from merchants, and an additional commission for currency conversion operations in this situation. These increased payments result in higher earnings for the corporation, therefore the return of international travel activity aids Mastercard in regaining revenues.

Mastercard’s foreign segment revenues plummeted by more than 60% in 2020, following the implementation of tight limitations on overseas travel. In 2021, a minor uptick in foreign travel contributed to an improvement in Mastercard revenues; international business revenue was just 29% lower than in 2019.

International travel restrictions began to loosen in late 2021, and several nations opened in February and March 2022, resulting in a rise in the number of individuals traveling. According to Mastercard’s revenue report for the first quarter of 2022, the quarterly volume of cross-border transactions climbed by 53% over the previous quarter. Furthermore, Mastercard’s annual compound growth rate (CAGR) increased by 23% in the last year.

It’s too early to talk of restoring tourism completely, particularly foreign tourists. According to the International Air Transport Association, the number of passengers will only surpass that of 2019 in 2024.

Due to geopolitical uncertainties and high inflation, analysts’ optimism about the tourism industry’s comeback is tempered. According to the Mastercard report, consumer spending is expected to stay healthy in the first quarter of 2022. Furthermore, the company anticipates that if the restrictions in Asia are lifted, revenue in this region will begin to rise.

The stock of Mastercard Incorporated (MA) fell -1.77 percent to $347.12 on Friday. The company’s current market capitalization is $343.70 billion, with 977.00 million shares outstanding.

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