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Why Mastercard Plummeted by Over 8% on Wednesday

By Eric Volkman – Oct 28, 2020 at 6:25PM

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The coronavirus pandemic is hitting the company hard.

What happened

Mastercard (MA 1.00%) didn't look particularly masterful in its latest quarterly results. The company unveiled its third quarter of fiscal 2020 numbers on Wednesday morning, with the headline figures coming in under analyst estimates. Investors promptly traded down the stock, which sank by more than 8% on the day.

So what

Everyone expected Mastercard to post declines in revenue and profitability; there's a global pandemic raging, after all, and economies are constricted because of it. 

The company's revenue fell by 14% on a year-over-year basis to $3.84 billion, some distance down from the average analyst projection of $3.94 billion. Non-GAAP (adjusted) net income fell more precipitously, tumbling 27% to land at $1.6 billion, or $1.60 per share. Prognosticators were collectively modeling $1.64 for the latter.

A stack of payment cards.

Image source: Getty Images.

The economic privations of the pandemic were the obvious culprit, meanwhile several line items were of particular concern. One was Mastercard's usually robust take from cross-border transactions; these fell a worrying 36% year over year.

Meanwhile, the company suffered in comparison to arch-rival Visa (V 0.68%), which released more encouraging Q3 results after market close the same day.

Now what

Not all of Mastercard's news was bad. With an over 42% adjusted net profit margin, the finance sector giant remains very far in the black. It also operates in a world that is continuing to march away from cash and into card and digital means of payment, a trend that very much favors card behemoths like itself and Visa.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Mastercard and Visa. The Motley Fool has a disclosure policy.

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