Mastercard Inc (NYSE: MA) will report its fourth-quarter (Q4) earnings on Jan. 31. Wall Street expects $3.08 in EPS and $6.48 billion in revenues as the company reports before market hours.
The company's stock is up about 20% over the past year. Mastercard rival Visa Inc (NYSE: V) gained just a notch above at 21.20%. The stock is currently making new all-time highs, on investor optimism as it heads to report Q4.
On Jan. 25, Visa posted quarterly earnings of $2.41 per share, surpassing the analyst consensus estimate of $2.34 by 2.99%.
The revenue for the quarter stood at $8.63 billion, clocking a surprise of 1.10%. But, the global payment network provider's stock slid 2.5% in after-hours trading as the company posted weaker-than-expected payments volume in its Q1 2024.
Here's what analysts will be focusing on, and how the stock currently maps against Wall Street estimates.
Mastercard Investment Thesis
Mastercard has demonstrated robust financial performance in the third quarter, showcasing solid net revenue and non-GAAP EPS growth. With an A+ credit rating from S&P and a stable outlook, the company's healthy financial position underscores its stability in the market.
Positioned strategically in the growing e-commerce market and embracing emerging technologies like blockchain and cryptocurrencies, Mastercard exhibits adaptability to evolving trends in the payment industry. The company's 12-year track record of increasing dividends, coupled with a consistently healthy payout ratio around 20%, reflects a balanced approach that supports sustained financial health and strategic flexibility.
While Mastercard's long-term business model remains optimistic, 2024 may pose challenges, limiting immediate stock upside. Record-high margins (operating margin going up to 57.5% and net income margin at about 45%), a key driver of past performance, could be difficult to replicate in the coming year.
The stock's current pricing at 36.25 forward P/E, reflects peak profitability, which may restrict potential upside unless the company can further improve margins.
Despite the potential challenges in 2024, Mastercard remains a top pick within the electronic payments space, benefiting from its solid historical performance and strategic positioning. However, investors should be mindful of the limited upside for the year ahead and potential risks associated with a drop in free cash flow yield, especially in a higher-rate environment.
Mastercard Analysts' Focus & Consensus Ratings
Q4 Analysts' Focus: Analysts would be focusing on Mastercard's positioning vis-a-vis its key competitor, Visa. Margin profile would also be in focus which analysts assessing their sustainability in 2024's anticipated lower rates environment.
Ratings & Consensus Estimates: Consensus analyst ratings on Mastercard stock stand at a Buy currently with a price target of $417.44. However, recent ratings received in January 2024 have pegged the stock's target price between $462 and $510 a share so far.
MA Price Action: Mastercard stock was trading at $443.67 at the time of publication.