Mastercard Gives Second Q1 Revenue Warning Due to Coronavirus

Mastercard Inc. MA gave a second revenue warning for the first quarter, which will be impacted due to the coronavirus pandemic.

The company’s cross-border business has taken a hit due to a reduction in cross-border travel, as people around the globe are taking precautionary measures. Several travel booking have been cancelled and cruise operators are considering suspending further bookings. The company is witnessing deterioration in its cross-border, switched volume and switched transaction metrics.

Mastercard now expects first-quarter growth in net revenues in the low-single-digit range. Currency headwinds will drag the net revenue growth by about 2%. Late last month, the company made first revision to its earnings guidance following the COVID-19 outbreak. It then announced that its first quarter year-over-year net revenue growth would be around two to three percentage points lower than the forecast given in January, due to the Covid-19 outbreak.

Also, operating expenses in the quarter is expected to be in the low-to-mid single-digit range.

Notably, the company has undertaken several actions to manage its expenses prudently, including evaluating travel & entertainment, advertising & marketing, and professional fees spending starting first quarter, all while ensuring that it invests in the long-term growth of the business.

Mastercard also suspended its annual 2020 outlook for net revenue and operating expense growth, owing to coronavirus-led volatility.

Last month, Mastercard announced that if the impact of the coronavirus is limited to the first quarter, its 2020 annual net revenue growth rate would be at the low end of the low-teens range, on a currency-neutral basis, excluding acquisitions.

Despite the trimming of revenue guidance twice in a span of one month, shares of the company gained a good 16.6%. This rally can be attributed to the positive sentiment that swept across the markets that $2 trillion coronavirus stimulus deal for businesses would provide the much-required support to the economy.

Also, other companies in the same space such as Visa Inc. V, American Express Co. AXP and Discover Financial Services DFS gained 13.84%, 21.9% and 26.75%, respectively, in the last trading session.

Year to date, the stock of Mastercard has lost 20.6% compared with its industry’s decline of 21%.

 

The decline in share price seems a good opportunity to accumulate the stock of Mastercard. The usage of digital payments is rapidly catching up with people who want to stay away from physical handling of cash to avoid coronavirus transmission. This trend  continue and boost the company’s growth.

Mastercard carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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