Mastercard Stock Gained 20% In The Last Six Months, What To Expect From Q1 Results?

Mastercard (NYSE: MA) is scheduled to report its fiscal Q1 2024 results on Wednesday, May 1, 2024. We expect Mastercard to beat the consensus estimates of earnings and revenues. The company outperformed the street expectations in the last quarter, with net revenues (revenues minus rebates & incentives) of $6.5 billion – up 13% y-o-y. It was mainly driven by a 10% growth in the gross-dollar volume (GDV), an 18% rise in the cross-border volume, and a 12% gain in the number of switched transactions. We expect the same trend to continue in Q1. Our interactive dashboard analysis on Mastercard’s Earnings Preview has more details.

Amid the current financial backdrop, MA stock has shown strong gains of 30% from levels of $355 in early January 2021 to around $460 now, vs. an increase of about 35% for the S&P 500 over this roughly 3-year period. However, the increase in MA stock has been far from consistent. Returns for the stock were 1% in 2021, -3% in 2022, and 23% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that MA underperformed the S&P in 2021 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for other heavyweights in the Financials sector including JPM, V, and BAC, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could MA face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

Our forecast indicates that Mastercard’s valuation is $471 per share, which is 2% above the current market price of around $462. 

(1) Revenues expected to marginally beat the estimates

Mastercard’s revenues (net revenues) grew 13% y-o-y to $25.1 billion in FY 2023. 

• The cross-border volume increased by 24% in the year. We expect the same trend to continue in the first-quarter results.
• The gross-dollar volume (GDV) increased 12% over the same period. We expect the Q1 results to be on similar lines. 
• Similarly, the number of switched transactions improved by 14%. The same momentum is expected to continue in Q1.
• Overall, we forecast Mastercard’s net revenues to remain around $28.12 billion for the full-year 2024.

Trefis estimates Mastercard’s fiscal Q1 2024 net revenues to be around $6.39 billion, just above the $6.34 billion consensus estimate.

(2) EPS is likely to edge past the consensus estimates

Mastercard Q1 2024 adjusted earnings per share (EPS) is expected to be $3.27 per Trefis analysis, almost 1% above the consensus estimate of $3.23. The adjusted net income improved 13% y-o-y to $11.2 billion in FY 2023. It was partly due to growth in the top line and partly due to lower expenses as a % of revenues. We expect the Q1 results to follow the same trend. Overall, Mastercard is likely to report an annual GAAP EPS of $14.43 for the full-year 2023. 

(3) The stock price estimate is 2% higher than the current market price

We arrive at Mastercard’s valuation, using an EPS estimate of around $14.43 and a P/E multiple of just below 33x in fiscal 2024. This translates into a price of $471, which is 5% above the current market price. 

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year 

[1] Returns as of 4/29/2024
[2] Cumulative total returns since the end of 2016

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