Rethinking MA as an Earnings Play
So I am sitting here thinking about whether or not to sit through MA’s earnings. (I re-entered MA via 160 Nov Calls today) The chart still looks bullish, and a natural move to the upper resistance should occur, but fundamental events (like earnings) always de-rail the natural desire of a stock’s psychological behavior.
Digging through last quarters results, I came across some interesting stuff. First off, my article stating that a PEG of 1.59 is pretty pricey. Well, coincidently as it may sound, with a 5yr est. growth rate of 20%, MA is still at about a PEG of 1.59. But this go around, I do not consider it pricey. Here is why…
1. Analysts have raised their estimates since the last quarter, but I do not think high enough.
2. The company beat last time by about 8% on the strength of strong international growth.
3. During the last Q, the company stated “Two percent of Mastercard’s quarterly revenue growth was due to the weakening dollar”. (This is key, especially from July to October)
From end of June to the end of Sept the dollar saw a massive decline, thanks to the Fed cuts. If the previous quarter’s decline caused MA to see 2% rev growth, than this quarter should have a bigger effect.
Other companies with strong international exposure saw nice stock appreciation, MA should be no different (unless a negative fundamental shift occurred in the macro conditions of their biz model).
Taking into account the weakening dollar, growth from abroad, and the growing use of plastic verse cash I think a 5yr growth rate of over 20% is merited. As such, the stock can potentially test new highs, if my thesis holds.
