Mastercard (MA), the world’s second-largest electronic payment network, is scheduled to release its earnings report for the first quarter of 2021 on Apr. 29 before the markets open. What can investors expect from Mastercard’s earnings report? Should you buy MA stock before the Q1 earnings release?
Mastercard plays an important role in the global financial system, enabling electronic payments for financial institutions, consumers, merchants, and other organizations. The company’s payment volumes were hit hard as spending reduced amid the COVID-19 pandemic. As a result, Mastercard’s revenue fell by about 9 percent YoY (year-over-year) to $15.3 billion in 2020.
Mastercard’s Q1 2021 earnings estimates
Mastercard's total revenue is projected to rebound significantly in 2021, and the company's first-quarter results will provide investors with insights into how quickly customer spending is recovering. Additionally, as many people use Mastercard to book trips, Mastercard’s earnings could indicate the state of the travel industry.
In the first quarter, analysts expect Mastercard's sales to fall 0.3 percent YoY to $4 billion from $4.01 billion, and its adjusted EPS to fall to $1.58 from $1.83 a year ago. In the fourth quarter of 2020, the company posted EPS of $1.64 on sales of $4.1 billion.
Mastercard’s stock analysis is all over the map
On Apr. 20, Morgan Stanley analyst James Faucette boosted its target price on Mastercard stock to $418 from $412 and maintained an “overweight” rating on the stock. The analyst said that the company is positioned for a strong rebound in the second quarter and beyond as economic conditions appear strong.
On Apr. 20, Barclays analyst Ramsey El-Assal also raised his target price on Mastercard stock from $380 to $402, and maintained an “overweight” rating on the stock. The analyst said that intra-quarter spend data was impacted due to external factors but it’s still strong. Meanwhile, JPMorgan Chase raised its target price on Mastercard stock from $342 to $387 on Apr. 26.
Mastercard pays dividends
Mastercard stock pays an annual dividend of $1.76 per share with a dividend yield of 0.45 percent. With its first-quarter earnings results, the company is expected to report a dividend per share of $0.37.
Mastercard’s stock price forecast
According to MarketBeat, analysts' average target price is $369.69 for Mastercard stock, which is 4.5 percent below its current price. Of the 28 analysts tracking Mastercard, 26 recommend “buy,” and two recommend “hold.” None of the analysts recommend “sell.” Their highest target price of $450 is 16.3 percent above the stock's current price, while their lowest target price of $304 is 21.5 percent below.
Should you buy Mastercard stock before earnings?
Mastercard's NTM (next-12-month) EV-to-sales multiple of 21.4x, which makes it look expensive compared with other financial services stocks. Visa and PayPal are trading at NTM EV-to-sales multiples of 20.4x and 12.0x, respectively.
Mastercard stock doesn't look like a good buy before its first-quarter earnings results. The company is expected to post a YoY decline in earnings on lower sales when it announces results for the first quarter of 2021. The stock might move lower if these key numbers miss analsts' expectations.