Market News

Mastercard Sees Improvement In May Switched Transactions As Lockdown Eases

Mastercard Inc. (MA) said on Tuesday that switched transactions continued to improve since the week ended May 7, partly due to the relaxation of social distancing measures in several markets and the impact of fiscal stimulus in the U.S.

The total number of switched transactions by Mastercard fell 7% in the week ended May 28 compared with a 12% drop for the week ended May 7. The improvement comes after switched transactions declined 20% during the month of April.

Mastercard said that switched transactions trends were similar to what the credit card company was seeing in switched volumes, as it continues to actively monitor the COVID-19 impact globally.

“We have seen a greater improvement in card present growth rates in particular, including in discretionary categories such as clothing, gas, home improvement, restaurants and domestic travel,” Mastercard said in a statement. “Card not present growth rates remain healthy.”

From a geographic perspective, Mastercard said it is experiencing positive year-over-year growth rates in some markets that have opened up, including countries such as Italy, Poland and Australia. Meanwhile, cross-border volume continues to be impacted by the travel freeze and remains essentially unchanged.

“We continue to see strong demand for our data & analytics and cyber solutions,” Mastercard said. “In Q2, we expect services growth will continue to outperform our core products and deliver positive growth.”

Earlier this month, Visa (V) provided a business update indicating a solid uptick in consumer spending from April to May.

Since plunging to a multi-year low in March, Mastercard shares have rallied some 52%, recovering all of this year’s losses. The stock was trading little changed at $309.50 in Tuesday’s early morning trading.

Five-star analyst Moshe Katri at Wedbush this month raised the stock’s price target to $330 from $300 and maintained a Buy rating, saying that he believes “gradual improvements in card metrics trends, as well as travel spending will help further expand forward P/E multiples from COVID-19’s lows, getting closer to pre-COVID-19 levels”.

The rest of Wall Street analysts are also bullish on the stock. The Strong Buy consensus boasts 19 Buy ratings versus 3 Hold ratings. Following the recent sharp gains, the $313.10 average price target means shares are almost fully priced. (See Mastercard stock analysis on TipRanks).

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