Mastercard Exceeds Q4 Expectations; Shares Rise

Shares of Mastercard Inc. (MA) spiked more than 4% after the company reported fourth-quarter results, exceeding both earnings and revenue expectations. Shares of the global payments networking company closed up 1.7% at $350.53 on January 27.

The company attributed the business’s momentum to the recovery in travel and spending activities across the globe. Mastercard also stated that Q4 cross-border spending has reached pre-pandemic levels, which signals an upward trajectory for the sector’s performance in fiscal year 2022 as well.

As of December 31, 2021, the company’s customers had issued 3.0 billion Mastercard and Maestro-branded cards. Over the past year, MA shares have gained 11.4%.

Robust Results

Mastercard reported Q4 adjusted earnings of $2.35 per share, up 43% year-over-year and significantly higher than analyst estimates of $2.21 per share.

Moreover, quarterly net revenue rose 27% year-over-year to $5.21 billion and surpassed Street estimates of $5.17 billion.

The revenue growth was aided by a 23 % growth in Gross Dollar Volume (GDV), on a local currency basis to $2.1 trillion. Similarly, Cross-border Volume grew 53% (on a local currency basis), while Switched transactions grew 27%.

Additionally, the company repurchased $1.3 billion worth of common shares and paid dividends worth $434 million in Q4.

For the full year fiscal 2021, MA earned net revenue of $18.88 billion, growing 23% annually, while adjusted earnings rose 31% annually to $8.40 per share.

CEO Comments

Mastercard CEO, Michael Miebach, said, “We are executing on our strategic priorities and making good progress in scaling new products, strengthening partner relationships, and winning new deals. Further, we are adding to our unique services capabilities with the planned acquisition of Dynamic Yield, which creates individually tailored experiences for consumers across digital channels.”

2022 Outlook

For the full year fiscal 2022, Mastercard expects net revenue growth in the high teens and earnings per share growth in the low twenties.

Analysts’ Take

Responding to Mastercard’s Q4 performance, Mizuho Securities analyst Dan Dolev assigned a Buy rating to the stock and set a price target of $400, which implies 14.1% upside potential to current levels.

Dolev is somewhat disappointed by the weak FY22 net revenue guidance, which fell short of expectations.

Commenting on the outlook, Dolev said, “Overall, cross border volumes (CXB) was fine and “above pre-pandemic levels.” However, with decelerating CAGR volume trends in January – especially in the U.S., albeit somewhat understandable due to the virus – we expect a muted stock reaction today… On a more positive note, operating expense guide of low double digits is mostly OK, roughly in-line with pre-quarter consensus growth expectations.”

One of the top technology stocks, MA commands a Strong Buy consensus rating, with 14 unanimous Buys. The average Mastercard price target of $433.14 implies 23.6% upside potential to current levels.

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