Bank of America sees Mastercard opportunity Wall Street missed | Louis Velazquez - Official Website, Entrepreneur, Finance, Technology

Mastercard’s (MA) latest earnings report delivered just about everything Wall Street could ask for.

Revenue rose 14% to $9.3 billion. Adjusted earnings per share rose 21% to $5.04. Purchase volume increased 10% and cross-border volume jumped 12%. The company also raised its 2026 guidance to the top end of its prior range.

Still, investors had reason to be concerned.

Mastercard’s July expenditure trends slowed a bit, with cross-border growth rolling off the pace established in the second quarter. That was a common fear: Maybe consumers are now starting to draw back after years of endurance.

Bank of America says Wall Street is reaching the wrong conclusion.

In a July 30 note from BofA Global Research obtained by TheStreet, analyst Matthew O’Neill argued that July’s results were softer than the underlying business actually was because of Prime Day timing, tough year-over-year comps, and other calendar influences.

The brokerage maintained its Buy rating and boosted its price target on Mastercard to $735 from $700. That’s a 27.3% upside from the $577.35 share price mentioned in the note.

This increase is not just a pat on the back for a good quarter.

Mastercard is just beginning to deploy payments, cybersecurity, and stablecoin settlement using artificial intelligence, and Bank of America feels investors are mistaking short-term noise for a faltering payments business.

“We view Mastercard as a strong business with a high margin profile, strong fundamentals, and defensible moat,” O’Neill wrote in the BofA Global Research report, underscoring the veteran analyst’s belief in the stock.

Bank of America sees strength beneath Mastercard’s slowdown

The July stats for Mastercard weren’t that bad at the headline level.

Worldwide switched volume was up 9% through July 28, matching its second-quarter growth rate. U.S. switched volume increased 6%, while switched transactions remained up 9%. Cross-border volume grew 11%, down from 12% during the second quarter.

The cleaner comparison was considerably more pronounced, Bank of America said.

After excluding a completed debit-card migration that distorted the prior-period comparison, U.S. switched volume was running near 10%, about two percentage points better sequentially, according to the report.

That’s a key distinction.

If there were a consumer downturn, you would see it in the number of transactions, in domestic spending and in international travel.

Meanwhile, Mastercard continues to report solid activity across income categories. Management said much of the decrease in July was due to Amazon Prime Day moving some purchases into June, as well as tougher comps from the previous year.

The cross-border trends were also stronger than the overall statistics suggested. Spending outside Europe grew to 12% from 11% in the second quarter, while travel-related cross-border volume rebounded to 8% from 6%.

Mastercard also saw a recovery in U.S. travel, increased outbound activity from Gulf Cooperation Council countries, and better access to U.S. currencies in Venezuela, BofA said.

Another cause of relief was the outlook in the Middle East.

Management has previously warned that regional unrest could hit hardest in the second quarter before activity picked up later in the year. In its revised guidance, one of the greater risks to cross-border expenditure is currently assumed to remain comparable to conditions seen near the end of the quarter.

That gives us a business that looks steadier than July’s topline growth rates would suggest.

Bank of America responded by increasing its 2026 adjusted EPS estimate to $19.95 from $19.50. It raised its 2027 estimate to $23.55 from $22.89 and its 2028 projection to $27.63 from $26.83.

The $735 target is 29 times earnings on the firm’s unchanged forward forecast. BofA says Mastercard’s growth, global network, execution record, and competitive moat warrant the premium.

Mastercard’s AI payments bet changes the growth story

Most of the surprises in Mastercard’s quarter have little to do with credit cards.

Mastercard can become a vital trust layer when artificial intelligence agents start buying goods and services on behalf of consumers and organizations, CEO Michael Miebach said during the earnings call.

Mastercard is already building that infrastructure.

Its Agent Pay for Machines offering lets credentialed AI agents operate within specified spending limitations and perform transactions across cards, bank accounts and stablecoins. The system also offers continuous machine-to-machine payments and multi-rail settlement.

More AI:

Mastercard’s Verifiable Intent technology, created with Google, generates a tamper-proof record of what a consumer authorized an AI agent to perform. The record helps consumers, retailers, and banks determine whether an agent operated within its instructions.

That’s a problem that traditional payment networks know all too well.

Consumers may let an AI assistant plan flights or refill supplies, but they’ll still want the opportunity to challenge an unauthorized or inaccurate purchase. Mastercard argues its current chargeback regulations, fraud controls, and merchant relationships offer it an edge over emerging payment systems that don’t have similar protections.

The company is also expanding outside artificial intelligence.

Mastercard aims to enable settlement using regulated stablecoins on several blockchains. USDC, PYUSD, USDG, USDP, and other digital currencies have been approved as settlement possibilities, with more to come in 2026.

That would connect traditional currencies to payments made on the blockchain and increase Mastercard’s ability to serve financial institutions utilizing tokenized assets through its planned acquisition of stablecoin infrastructure provider BVNK for up to $1.8 billion.

Mastercard’s July wobble may hide a much bigger opportunity

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Bank of America sees more than a consumer-spending story

At the heart of Bank of America’s bullish thesis is diversification.

Consumers continue to make purchases and travel worldwide, generating large revenues for Mastercard. Meanwhile, its fastest-growing businesses increasingly offer services built on top of the payment network.

Value-added services and solutions revenue rose 20% during the second quarter, or 18% on a currency-neutral basis. Payment-network revenue increased 10%, or 8% after adjusting for currency.

Cybersecurity remains one very crucial pillar of that plan.

BofA said Mastercard Threat Intelligence has discovered well over 7 million card-testing assaults across 192 countries and helped stop an estimated $172 million in fraud since it was launched. Mastercard’s current connections to banks and merchants provide an organic pathway to sell more identity, fraud, and cybersecurity goods.

The company is also working on global expansion.

Mastercard has engaged in an exclusive alliance with Alipay+ and struck an agreement in Mexico, where about 70% of consumer payments remain cash-based, the BofA report said. It is also partnering with the Central Bank of the United Arab Emirates to become a switch provider for domestic debit transactions.

Those prospects help Bank of America overlook a few weeks of lower expenditure statistics.

Key points behind Bank of America’s Mastercard call

Price objective: BofA raised its target to $735 from $700.
Rating: The firm reiterated its Buy recommendation.
Earnings: BofA increased its EPS forecasts through 2028.
Consumer spending: The firm views July’s moderation as calendar noise rather than a genuine collapse.
Growth engines: AI payments, cybersecurity, stablecoins and cash displacement could reduce Mastercard’s dependence on traditional card volume.
Risks: A recession, regulation, new payment networks, AI disintermediation and geopolitical instability could undermine the thesis.

The risks are real.

A sharp slowdown in the economy would put pressure on payment volumes. Regulators might change fees or the way business is done. AI agents might reroute transactions away from Mastercard’s network, and competing digital rails and real-time payment systems might capture market share.

The stock is not cheap either.

BofA values Mastercard at 28.9 times forecast 2026 earnings. Investors will pay up for reliable double-digit growth and a belief that the corporation can defend its network as commerce advances.

That’s why investors closely watched July’s spending data.

A persistent consumer slump would affect earnings forecasts and value multiples underpinning the shares.

But Bank of America doubts that’s what the current data is showing.

Rather, the firm forecasts resilient transaction growth, stronger cross-border travel, and a corporation entering new markets before those areas reach scale.

Wall Street felt the drag of July.

Bank of America recognized the potential.