Mastercard Tops Earnings and Revenue Estimates on Spending Boom

Mastercard, a global payments and technology company, reported better-than-expected earnings and revenue in the third quarter, largely driven by strong domestic and cross-border spending which has recently returned to its pre-COVID-19 levels.

The U.S. multinational financial services corporation reported a net income of $2.4 billion and diluted earnings per share of $2.44, beating the market expectations of $2.19 per share. The Purchase, New York-based firm said its net revenue jumped 30% to $5.0 billion, above the Wall Street consensus of $4.95 billion.

Following this Mastercard’s shares rose 3% to $345 in premarket trading on Thursday but was trading 0.26% lower at $334.84 at the time of writing.

It is worth noting that its rivals American Express and Visa also beat estimates on spending growth.

Analyst Comments

“Mastercard (MA) reported solid 3Q results ahead of estimates with volume growth (ex-cross border) on a two-year stack having largely returned to normal. Key metrics accelerated sequentially in 3Q and further in October MTD. We expect the stock to be strong at the open,” noted Andrew Charles, equity analyst at Cowen.

“Revenue growth is expected to be in the mid-20s vs. consensus of +26%, or in the low-20son a non-GAAP organic cc basis. Operating expenses are expected to be up in the mid-teens. On a non-GAAP basis, operating expense growth is expected to be in the high-end of high-teens, or the low-end of low double-digits on a non-GAAP organic cc basis. Note, we were modelling 27% revenue growth and 20.5% operating expense growth.”

Mastercard Stock Price Forecast

Fourteen analysts who offered stock ratings for Mastercard in the last three months forecast the average price in 12 months of $437.64 with a high forecast of $482.00 and a low forecast of $385.00.

The average price target represents a 30.53% change from the last price of $335.29. From those 14 analysts, 13 rated “Buy”, one rate “Hold”, while none rate “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $266 with a high of $319 under a bull scenario and $184 under the worst-case scenario. The firm gave an “Overweight” rating on the restaurant chain’s stock.

“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 a card from cash. As the second-largest global card network (behind Visa), MA appears well-positioned to benefit from market share gains in particular regions and consumer spending trends, which have been fairly resilient even through economic cycles,” noted James Faucette, 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.”

Several other analysts have also updated their stock outlook. Jefferies lowered the target price to $425 from $450. JPMorgan raised the price target to $430 from $427. Mizuho lifted the target price to $450 from $435.

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