Mastercard earnings to push stock to record high?

Mastercard is set to report its 4Q earnings in just a few hours, before US markets open today (Thursday, January 26^th).

This stock closed yesterday (Wednesday, January 25^th) at $381.96, which is just 3.72% below its highest-ever closing price of $396.17 registered on February 2^nd 2022.

Mastercard’s stocks are forecasted to move by 4%, either upwards or downwards, when US markets open right after its earnings.

Such a 4% single-day, post-earnings move would be much larger than the average one-day price change of 2.4% after each of its quarterly announcements over the past decade.

 

Key figures to look out for:

Here are analysts’ consensus forecasts for some of Mastercard’s key financial readings:

• Revenue: US$ 5.81 billion
   
• EPS (earnings per share): $2.58
   
• Net income: US$2.49 billion

 

For seasoned investors, they will be closely scrutinising these two crucial points as well:

1. Purchase volume estimate US$ 1.77 trillion
   
   The purchase volume figure represents how much consumers worldwide spent using Mastercard’s network. Note also that US spending accounts for about a third of Mastercard’s total volume.
   
   Markets want to know whether consumer spending can remain resilient in the face of still-elevated inflation and rising recession fears.
   
   An official tally of US$ 1.77 trillion would mark an +11.4% year-on-year growth in constant currency terms, which would also be its slowest y/y growth rate since Q1 2021 as the world was still trying to crawl out from under the pandemic.
   
    
2. Cross-border volume: +34.6%
   
   Cross-border transactions are more lucrative for Mastercard given the higher fees (as you may already well know from your own experience when using your credit card overseas).
   
   As the “revenge travel” phenomenon continues playing out around the world, with travellers eager for fresh sceneries after being cooped up at home during the pandemic, that should translate into higher earnings for Mastercard.

 

Still, note that the above metrics are backward-looking.

Markets, by virtue of being a forward-looking beast, also want to be offered signs as to what the future holds for Mastercard.

Hence, Mastercard’s share prices are set to reflect the sentiment contained in the company’s earnings outlook.

• Should Mastercard can remain confident that global spending can hold up amid a looming recession, along with potential bumps in China’s economic reopening, that may help boost its share price.
   
• However, if management signal growing concern about the above-mentioned risks, while suggesting a slowing slope for earnings growth in light of tougher year-on-year comparisons (as mentioned above, the y/y growth rate for purchase volumes is set to post its lowest print since Q1 2021), that could spur some profit-taking in a stock that’s already soared by 10% so far in 2023.

 

Mastercard still 5% away from intraday high

Although this stock is just 3.72% below from its highest-ever closing price, it’s a slightly larger gap of 5% between its latest price and its all-time high using intraday prices.

That intraday record sits above the psychological $400 mark, registered back in April 2021.

Looking at the intra-week prices, note how yesterday’s close brings this stock to a key resistance level around $382, which had repelled bulls back in January and April 2022.

Multiple resistance levels can also be traced further up its northward route.

Mastercard has also soared by just slightly under 10% (9.97%) so far in 2023, which is more than double the S&P 500’s year-to-date gains of 4.6%.

Yet, despite its steep advance, this stock has yet to breach into “overbought” levels:

• the 14-week relative strength index has not broken past the 70 threshold yet
• this stock is still trading below its upper Bollinger band

Such technical factors suggest that this stock could still claim some more upside before needing to clear some froth via a technical pullback.

 

Overall, should Mastercard’s earnings handily beat market estimates, this stock could post a fresh record high.

That’s of course conditioned on the premise that the forecasted 4% single-day post-earnings move materialises to the upside today.