Analysis

Why Mastercard Stock Sank on Wednesday

Investors were clearly expecting better performance from MasterCard in its latest quarter.

Within the finance sector over many years, Mastercard (MA -2.02%) has been one of the more popular stocks to own. Yet there was a distinct lack of love for the payment card giant on Wednesday, as investors traded out of the stock to the point where it lost 2% of its value.

The culprit? The company’s latest set of quarterly results.

Double-digit increases

Revenue came in at $6.3 billion for Mastercard in its first quarter, which was 10% higher year over year. On a currency-neutral basis — which matters, as the company operates around the world, and its native currency is the strong U.S. dollar — that growth amounted to 11%. This was on the back of a nearly 9% increase in gross dollar volume (GDV) to almost $2.3 trillion.

Non-GAAP (generally accepted accounting principles) adjusted net income also saw a double-digit increase. It was 16% above the first-quarter 2023 figure on both an as-reported and currency-neutral basis, at $3.1 billion ($3.31 per share).

As in previous quarters, Mastercard’s improvements came down to consumers swiping and tapping more with their plastic to buy stuff. What also helped was continued growth in cross-border commerce; this rose by 18% during the period.

The revenue miss was conspicuous

Yet the professionals tracking Mastercard thought a generally healthy global economy would more greatly enhance the company’s top line. On average, they were estimating it would earn $6.34 billion in revenue, a miss that couldn’t quite be offset in the investor mind with a good, if not spectacular, earnings beat — collectively, the prognosticator forecast for per-share, adjusted net income was $3.24.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard. The Motley Fool recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

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