Mastercard beats Q2 2017 view, Gross dollar volume up 9%

In the last week of July, consumer credit provider Mastercard Inc (NYSE: MA) reported higher than expected fiscal 2017 second-quarter revenue and earnings.

That took the share price to a new 12-month high of $132.20. Mastercard also reported an increase in switched transactions and gross dollar volume. Thus, considering the details presented below, we anticipate the stock to appreciate further.

The Purchase, New York-based company reported second-quarter 2017 revenues of $3.053 billion, up from $2.694 billion in the similar period of 2016. Net income for the June 2017 quarter was $1.177 billion, or $1.10 per share, compared with $983 million, or $0.89 per share, in the same period last year.

The FactSet Consensus was $1.04 per share on revenues of $2.98 billion. The effective income tax rate declined 30 basis points to 27.7% due to a favorable geographic mix of taxable earnings.

Mastercard

During the recent quarter, switched transactions increased 17% y-o-y to $16 billion. Similarly, gross dollar volume on a local currency basis grew 9% to $1.3 trillion (after adjustment to recent EU regulatory changes). Dollar volumes increased the most in Latin America. Vocalink, the payment gateway acquired by Mastercard, contributed 2% to revenue growth. Cross-border volumes increased 14% on a local currency basis. However, an increase in rebates and incentives had a negative impact on the revenue growth.

As of June 30, 2017, the company had issued 2.4 billion Mastercard and Maestro-branded cards.

During Q2 2017, Mastercard repurchased approximately 8 million shares valued at $931 million and paid $236 million in dividends. As of date, the company has $2.9 billion remaining under the current stock repurchase program. Mastercard’s CEO Ajaypal Banga stated that the company is looking beyond credit and debit cards to focus on electronic payment services that allow instant disbursements. Thus, fundamentally, the stock is expected to stay bullish on account of solid second-quarter results and diversification plans to fuel growth.

The stock, which closed at $131.09 yesterday, is moving above its 50-day moving average. Furthermore, the Chaikin money flow index reading is positive, while the stochastic RSI is in the oversold region. Thus, we anticipate the stock to record new yearly highs in the near future.

As a binary trader, we would like to purchase a call option to gain from the probable increase in the share price of Mastercard. A strike price of $130 and a contract validity period of one week looks ideal for the trade.

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