What happened
Mastercard (NYSE: MA) exited 2021 in style, delivering a fourth quarter that handily beat estimates and demonstrated that the company's business is continuing to grow robustly. After it posted those quarterly figures early on Thursday, several analysts upped their price targets on the stock the following day. These developments drew investors back to the payment card giant's shares, which closed over 9% higher.
So what
For the quarter, Mastercard's net revenue surged 27% higher year over year to $5.2 billion, while non-GAAP (adjusted) net income improved by 41% to $2.3 billion ($2.35 per share). On average, analysts had been forecasting $5.17 billion on the top line, with an adjusted per-share net profit of only $2.21.
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Two of those analysts, Morgan Stanley's James Faucette and BMO Capital's James Fotheringham, both raised their price targets on Mastercard stock in the wake of the earnings release.
Both did so incrementally, with Faucette adding $1 for a new target of $449 per share and Fotheringham lifting his by $2 to $401. Both analysts are also reiterating the equivalent of a buy recommendation on the stock.
In particular, Faucette is cheered by the resilience of consumer spending on travel, an important part of the company's business.
"We found it encouraging that [Mastercard management] reiterated their expectation that cross-border travel can return to 2019's levels by year-end 2022, despite market concern that omicron and/or potential future variants may have pushed the outlook," the analyst wrote in a new research note.
Now what
While the travel sector has been admirably resilient in the face of the coronavirus lately, it's set to really take off (no pun intended) when/if the threat recedes sharply. On top of that, the "war on cash" isn't over, and the best digital and card payment processors are on the winning side. Both trends were apparent in Mastercard's Q4, so its Friday share price pop was entirely justified.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns and recommends Mastercard. The Motley Fool has a disclosure policy.
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