Matt Giannino
Founder & CEO of Market Moves, Options-Selling Education
Mastercard and Raytheon are attractive discounted moat companies as narrow market leadership gives way to panic selling and rotation into overlooked names. Only 20% of the S&P 500 joined the last rally, while both names sit at multi-month discounts and are backed by 60-plus-year trends. x.comÂ
Mastercard may be the only scaled, capital-light network benefiting from AI, with bloated technical debt uniquely addressable by coding tools. Nominal inflation-linked recurring revenues and hardware attach add to the case at low-teens free-cash-flow yields. While payments getting bid in a red market probably signals the rally is over, these traits could mean it is not. x.comÂ
Mastercard is undervalued, with a margin of safety above 15% below a $479 share price per a full valuation model. Its duopoly moat is solidly in place, and the company is not going anywhere. x.comÂ
S&P Global, Mastercard, Visa, Moody's and Berkshire Hathaway have turned from portfolio ballast into funding shorts. These EPS compounders once pulled portfolios up alongside spicier longs, but they are never particularly cheap, Visa may rise only 4-5% on great earnings, and they can't be taken out. For most investors' horizons they are irrelevant next to momentum stocks that gap up 30% on narratives, so owning them now means being long funding shorts. That could change. x.com x.comÂ
Visa and Mastercard are at their most reasonable valuations in nearly a decade while remaining as dominant as ever. The duopoly takes a small slice of nearly every digital payment worldwide, with no credit risk, near-unbeatable moats and legendary margins. In the 2021 bubble they traded at 50-60 times free cash flow, leaving little margin of safety; normalization and temporary headlines have cut that to the mid-to-high 20s. A rare chance to buy two elite compounders at a steep discount. x.comÂ
American Express's credit risk keeps its multiple below Visa's or Mastercard's, but that persistently low valuation lets management retire shares steadily. At 16x forward earnings it is not especially cheap by its own history; 28% of shares were retired over ten years. Buying here looks more like owning a steady cash-returning compounder than expecting extraordinary returns. x.comÂ
Mastercard is worth about $473 per share on 13% growth in years one to five, with a conservative case of $342 and an optimistic case of $596. The wide range depends on whether near-term growth in payment volumes holds. x.comÂ
Visa and Mastercard are priced for a disruption that looks overdone, leaving two of the best compounders at decade-low multiples. Mastercard trades 34% below its 10-year median P/E, and Visa is similar. Stablecoins are about 2% of Visa's volume and years from replacing daily card use. The Credit Card Competition Act could cut fees from about 1.8-2.0% to 1.25%, with $10 billion-plus of industry revenue at stake, but analysts put its passage odds at 30-40%. x.comÂ
Visa and Mastercard look like attractive, safe cash machines at decade-low valuations, likely compounding 10-15% a year from here. Mastercard trades at 23x forward earnings, its lowest in a decade, and Visa at 22x; Mastercard just bounced off its 200-week moving average, untouched since 2022. They will not 10x in ten years but should protect the downside. Visa is slightly preferred for its sheer size, though Mastercard grows faster. x.comÂ
Mastercard isn't really cheap for its growth, while Nvidia is cheap, and Nvidia should handily outperform Mastercard over the next three years. x.comÂ
Financial toll booths have grown stronger and cheaper despite their capital-light, high-margin businesses' steady growth. The financial sector has lagged while the S&P 500 is up over 13% this year. S&P Global, Mastercard, Visa and MSCI have almost always traded at a premium, but not today. That mix of business quality and growth produced massive outperformance over previous decades; the current disconnect cannot be ignored forever. x.comÂ
