Mastercard stock is the IBD Stock Of The Day as the payments stock flirts with a buy point with spending trends and cross-border travel on the rise.
On Jan. 27, Mastercard easily beat earnings and revenue estimates for the December quarter. Cross-border payment volumes rose 53% year over year for the quarter and 32% for all of 2021, the company said.
"We had a strong fourth quarter as spending trends continued to improve, with Q4 cross-border spending now above pre-pandemic levels," said Mastercard CEO Michael Miebach in the Jan. 27 earnings news release.
Looking ahead to 2022, Mastercard is optimistic because "consumers, businesses and governments have become more adaptable to the changing environment," Miebach said.
With the U.S. economy doing better and international travel likely to return, the outlook for cross-border payments is good for card companies, including Mastercard and Visa. But Warren Buffett thinks card-network payment stocks are winners for the long term. Buffett's Berkshire Hathaway has owned American Express since 2001, and Visa and Mastercard stock since 2011.
Mastercard Stock Technical Analysis
Shares of Mastercard fell 2% to 382.20 on the stock market today. Mastercard stock has retreated just below a 382.60 handle buy point that it had cleared after earnings. MA stock could be working on an alternate handle right below the old high.
The relative strength line for Mastercard stock has rebounded since late November to its best level in months after sliding for much of 2021, according to MarketSmith chart analysis.
Visa fell 1.4% Friday, working on a handle in its consolidation. American Express gained 1%, with its RS line hitting a new high ahead of a potential breakout at 189.13. AXP stock had an early entry of 176.92.
Both Visa and American Express are also among traditional payment companies poised to benefit from the return of travel, which is good for cross-border payments. Visa stock also has a sharply rising RS line.
By comparison, the RS lines for PayPal, Block, which was formerly called Square, and Affirm have plunged to lows.
PayPal stock has plunged 23% so far this week, also taking down peers, after missing Q4 EPS views and guiding low on 2022 profit.
Digital payment processor PayPal also expects inflation to dampen consumer spending and supply chain issues to cut into cross-border payments. However, in contrast to PayPal, traditional card networks have given more upbeat guidance for the year.
Mastercard stock's IBD Composite Rating, which combines key fundamental and technical metrics in a single easy-to-use score, is a strong 90 out of 99.
Its Relative Strength Rating is 89. That means it has outperformed 89% of all stocks in the past year.
And Mastercard boasts strong institutional support, with 4,663 funds owning MA stock as of December, up from 4,514 in March.
Mastercard Earnings and Fundamentals
In Q4 2021, Mastercard earnings rebounded 43% per share as revenue rebounded 27%. For the full year, earnings were up 31% and sales up 23%, according to FactSet.
Mastercard earnings and sales are expected to grow further in fiscal 2022 and 2023 though below 2021 levels, FactSet says. They fell in 2020 amid the coronavirus pandemic.
The payments stock sports a superior EPS Rating of 91 out of 99.
Over the last three quarters, Mastercard earnings growth ranged between 43% and 48%, while sales grew between 27% and 36%. Both are comfortably above the 25% or higher threshold a CAN SLIM investor would want to see, though growth slowed slightly in the latest quarter.
Meanwhile, Mastercard is working on new products and new acquisitions for growth. In December, it announced an agreement to purchase McDonald's Dynamic Yield, a software-as-a-service (SaaS) platform that uses AI to personalize and enhance customer experience.
Find Aparna Narayanan on Twitter at @IBD_Aparna.
