Mastercard shares close lower on Wednesday, third-quarter profit drops 28%, travel spending to remain weak due to pandemic

Mastercard Inc (MA) said on Wednesday that overall travel spending would probably not pick up anytime soon, as it reported a sharp drop in its third-quarter earnings.

The company also said that cross-border volume recovery would depend on the timing and the availability of coronavirus vaccines.

Mastercard shares closed lower for a fourth consecutive trading session in New York on Wednesday. It has also been the steepest single-session loss since March 16th. The stock went down 8.11% ($25.73) to $291.38, after touching an intraday low at $289.31, or a price level not seen since July 14th ($288.65).

Shares of Mastercard Inc have retreated 2.41% so far in 2020 compared with a 1.25% gain for the benchmark index, S&P 500 (SPX).

In 2019, Mastercard’s stock went up 58.28%, thus, it outperformed the S&P 500, which registered a 28.88% gain.

Net revenue dropped 14% year-on-year to $3.8 billion during the third quarter, while the dollar value of transactions processed went up 1% year-on-year to $1.6 trillion, Mastercard said.

The company’s net income shrank 28% year-on-year to $1.5 billion ($1.51 per share) during the quarter ended on September 30th.

Earnings per share, which exclude special items, were reported at $1.60 during the latest quarter, while falling short of analyst estimates of $1.66 per share.

Mastercard also said that cross-border volumes had slumped 36% on a local currency basis.

“While we believe that cross-border will ultimately recover, it will take time for people to build their confidence in the safety of travel,” Mastercard’s Chief Financial Officer Sachin Mehra was quoted as saying by Reuters.

“We believe that is tied to the broad availability of vaccines and therapeutics, likely towards the latter part of next year.”

Mastercard said it expected US retail sales excluding automotive and gas to increase 2.4% during the busy holiday season, with consumer spending mostly focused on electronics, athleisure, clothing and home furnishing.

Analyst stock price forecast and recommendation

According to CNN Money, the 31 analysts, offering 12-month forecasts regarding Mastercard Inc’s stock price, have a median target of $365.00, with a high estimate of $415.00 and a low estimate of $315.00. The median estimate represents a 25.27% upside compared to the closing price of $291.38 on October 28th.

The same media also reported that at least 26 out of 36 surveyed investment analysts had rated Mastercard Inc’s stock as “Buy”, while 6 – as “Hold”.