Mastercard (MA) is having a great start to 2017 with its stock being up 4.87% year to date. The truth is that stock still has plenty of room to run because there are several factors that could bring it higher. The first of which was the earnings report that was posted.
The fourth quarter earnings beat on the EPS but slightly missed on the revenue side. It is not typical for Mastercard to miss on the revenue number, and may have fallen due to unforeseen circumstances. In either case, the prior third quarter report did beat on both the EPS and revenue metric.
The key point to consider is that the stock falling after reporting its most recent fourth-quarter earnings report, should be seen as a buying opportunity. That is because Mastercard still has a large market share to capture that has not yet been tapped.
Mixed Earnings
In its most recent fourth–quarter earnings report Mastercard reported mixed numbers. The earnings per share number was a beat, with the company reporting that it had earned $0.86 per share. This compares to analysts expecting the company to report $0.85 per share. The earnings beat on the EPS side was due to increased holiday spending by consumers. Unfortunately, this didn’t translate to a beat on the revenue side. Revenue for the quarter came in at $2.76 billion, just shy of the $2.78 billion estimate.
What must be realized is that the mixed earnings isn’t always a problem with Mastercard. In the prior third quarter earnings report it had reported an EPS of 1.08 per share on revenue of $2.88 billion. Such a drop quarter over quarter can be blamed on on seasonal adjustments and several other factors. Either way, this is a great buying opportunity.
Mastercard’s stock has been known to gap higher despite not beating earnings for a quarter or two. Back in 2014 the company performed a 10 for 1 stock split. The reason for doing so was to make the stock more accessible to traders. Mastercard’s stock had shot up so much because of momentum. Without a forward stock split the shares would possibly be trading at $1,080 per share today .
