Mastercard Drops After Warning Expenses Will Climb at Least 30%

Mastercard Inc. dropped the most in more than a month after warning it will step up spending on new products.

The company plans to invest more in data and cybersecurity products and boost spending on advertising and marketing, it said on a conference call Thursday. Expenses in the second quarter will climb by a percentage in the low 30s, it said, a bigger jump than the 11% increase analysts in a Bloomberg survey were expecting.

The coming jump in costs overshadowed a surprise increase in revenue that Mastercard posted for the first three months of the year.

“We think that given the positive momentum that we’re starting to see on the top line, it’s the right time for us to be stepping up on expenses,” Chief Financial Officer Sachin Mehra said in an interview.

Mastercard shares fell 2.5% to $385.80 at 11:22 a.m. in trading in New York, paring this year’s gain to 8.1%, in line with the advance of the S&P 500 Information Technology Index.

Revenue got a boost from a smaller-than-expected drop in overseas spending on the firm’s cards. Such transactions are often the most lucrative for both Mastercard and its rival Visa Inc. While such spending dropped 17% in the first quarter, Mastercard said cross-border volume climbed 66% in April from a year earlier. Spending on cross-border travel climbed 166% this month.

After consumers spent much of last year sheltering in place, Mastercard and Visa Inc. are set to benefit as travel picks up and vaccines for the coronavirus begin to proliferate around the world. Visa on Tuesday said it has seen a pick-up in Americans visiting Mexico and certain countries in the Caribbean that have opened their borders to tourists.

“This nightmare will be over at some point, hopefully soon,” Chief Executive Officer Michael Miebach said on a conference call with analysts.

Better-than-expected overseas spending helped fuel a 4% jump in net revenue, to $4.2 billion, topping the $3.99 billion average of analysts’ estimates compiled by Bloomberg.

Mastercard said overall spending on its cards climbed 10% to $1.3 trillion, helped by a 27% surge in debit volume. Results were boosted by stimulus payments the U.S. government sent directly to consumers’ bank accounts.

Excluding the impact of currency swings and expenses tied to acquisitions, costs are set to rise by a percentage in the “low 20s” in the second quarter compared with the same period a year earlier, Mastercard said.

“Management is opportunistically stepping up strategic investments, which combined with acquisitions will weigh on near-term estimates,” Sanjay Sakhrani, an analyst at Keefe Bruyette & Woods, said in a note to clients.

©2021 Bloomberg L.P.

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