Mastercard Shares Gain 4% After Q4 Earnings Beat; Target Price $384

Mastercard Inc, a leading global payment and a technology company, reported better-than-expected earnings in the fourth quarter of 2020 as customer spending recovered from the COVID-19 slump, sending its shares up 4% on Thursday.

The U.S. multinational financial services corporation said its net income declined 14% to $1.8 billion and net revenue slumped 7% to $4.1 billion, a tad higher than the Wall Street consensus estimate of $4 billion.

“Mastercard’s (MA) 4Q20 results were above our/consensus revenue and adj. EPS estimates. Global GDV was up 1%, processed transactions were up 4% and cross-border volume was down 29% cc. January key metrics decelerated due to declines in International. Total switched volume was +3%, the US switched volume was +9%, ROW switched volume declined -3%, processed transactions were +3% and cross border volume was down 31%,” said George Mihalos, equity analyst at Cowen and Company.

Excluding items, Mastercard reported net income of $1.6 billion or $1.64 per share, compared with $2 billion a year earlier, or $1.96 a share. That was higher than the market expectations of $1.51 per share.

“Mastercard continues to battle COVID-19-related headwinds and saw substantial year-over-year revenue and margin declines in the fourth quarter. However, there do appear to be some modest signs of improvement, and we believe that the long-term picture for this wide-moat franchise remains bright. We will maintain our $312 fair value estimate,” said Brett Horn, senior equity analyst at Morningstar.

At the time of writing, Mastercard shares traded 3.6% higher at $329.00 on Thursday; the stock surged about 20% in 2020.

Mastercard Stock Price Forecast

Twenty-one analysts who offered stock ratings for Mastercard in the last three months forecast the average price in 12 months at $384.63 with a high forecast of $440.00 and a low forecast of $333.00.

The average price target represents an 18.09% increase from the last price of $325.72. From those 21 analysts, 19 rated “Buy”, two rated “Hold”, and none rate “Sell”, according to Tipranks.

Morgan Stanley gave a base target price of $375 with a high of $430 under a bull scenario and $217 under the worst-case scenario. The firm currently has an “Overweight” rating on the credit services provider’s stock.

Several other analysts have also recently commented on the stock. Keybanc raised the target price to $345 from $325. Citigroup upped the price objective to $385 from $355. Mastercard had its price target increased by analysts at Barclays to $380 from $360. The brokerage presently has an “overweight” rating on the credit services provider’s stock.

In addition, Seaport Global Securities issued a “buy” rating and a $370 target price. JP Morgan reduced their price target to $342 from $372 and set an “overweight” rating. Smith Barney Citigroup reduced their price target to $355 from $384.

Analyst Comments

“Mastercard (MA) is one of our preferred stocks in the space. MA’s compounding growth drivers include resilient global consumer spend growth, market share gains, and the secular shift to the card from cash. As the second-largest global card network (behind Visa), MA is well-positioned to benefit from market share gains in particular regions and consumer spending trends, which have been fairly resilient even through economic cycles,” said Michael Cyprys, equity analyst at Morgan Stanley.

“These trends should support double-digit revenue growth over the next few years. High incremental margins and opportunities to expand its Vocalink and B2B capabilities should enable the company to drive compounding earnings growth longer term.”

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