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Can Q4 earnings push Mastercard’s share price higher?

Global payments giant Mastercard [MA] is expected to report a 24.5% increase in revenue from the year-ago quarter and a 32.9% rise in earnings year-on-year when it publishes its fourth quarter and 2021 full-year numbers on 27 January.

The Mastercard stock price could rise on the announcement of the company’s Q4 FY21 results on the back of growth and crypto strategy commentary.

According to analysts at Zacks, Mastercard is expected to post quarterly revenue of $5.13bn and earnings per share of $2.18 for the three-month period.

“Our performance was driven by the execution of our strategy, healthy domestic spending and solid growth in cross-border spending, which has recently returned to pre-pandemic levels,” said Michael Miebach, Mastercard CEO, when announcing the previous quarter’s results.

How has Mastercard’s share price been performing?

Since the beginning of the year, the share price has fallen by 8.5%. In comparison, its competitor Visa saw its share price fall by 8.8% year-to-date.

Over the past five years, both rival companies have generated returns greater than the S&P 500. Mastercard has increased 218.5%, outperforming Visa’s increase of 150.7%, while the S&P 500 has delivered 89.7% over the same period.

Despite the recent weaker performance, investors will be watching Mastercard’s results closely on 27 January.

Mastercard’s Q3 results were promising

The payments giant reported upbeat third-quarter figures in October. It delivered net revenue of $5bn for the three-month period, an increase of 30% year-on-year, smashing the consensus estimate of $4.95bn.

It was a similar case for quarterly earnings per share, coming in at $2.37, a year-on-year growth of 48%, surpassing the consensus estimate of $2.19.

Despite the impact of the pandemic, Mastercard displayed strong Q3 FY21 performance, driven predominately by gross dollar volume growth of 20% compared with the previous year, on a local currency basis, to $2trn. Cross-border volumes and switched transactions increased by 52% (on a local currency basis) and 25%, respectively.

New acquisitions strengthen Mastercard stock price position

Last year, Mastercard made a series of acquisitions. It believes there are significant opportunities to capture new payment flows and drive growth. The payments processor acquired CipherTrace, a leading cryptocurrency intelligence company in September to enhance its capabilities in this field.

“With the rapid growth of the digital asset ecosystem comes the need to ensure it is trusted and safe. Our aim is to build upon the complementary capabilities of Mastercard and CipherTrace to do just this,” said Ajay Bhalla, president of cyber and intelligence at Mastercard.

In 2021 it also purchased Aiia, a leading European open banking tech provider. The acquisition further strengthens Mastercard’s existing distribution channels, technology, data practices and global multi-rail and open banking strategy.

Short-term hurdles for Mastercard stock price

According to MarketWatch, the stock has consensus ‘buy’ rating with an average price target of $430.61, giving a potential upside of 23.2% from the current stock price.

Brett Horn, a senior equity analyst at Morningstar, believes Mastercard is likely to benefit from the ongoing acceleration towards electronic payments.

“Digital payments, on a global basis, surpassed cash payments just a couple of years ago… and we think emerging markets could offer a further leg of growth even if growth in developed markets slows,” Horn wrote in a recent note.

Despite Horn’s upbeat view, the analyst acknowledges that the company faces some short-term issues. The pandemic has depressed lucrative cross border transactions, which would take a few years to recover.

Morningstar increased its stock price target to $352 per share from $337. Earlier this month, Dan Dolev, analyst at Japanese investment bank Mizuho, lowered Mastercard’s stock price target from $465 to $400 but kept his ‘buy’ rating. Similarly, brokerage firm Wedbush reduced its price target from $400 per share to $380.


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