Friday’s hot jobs report for May shines the light on another key surprise: The consumer is hanging tough despite higher prices for gas and food.
“Good jobs report, good print. And it matches what we have been seeing over the last 12 months or so. Consistent consumer spending in the United States and around the world. Consumers are adjusting to some of the economic volatility. But the bottom line is spending continues, spending growth continues,” Mastercard CEO Michael Miebach said on Yahoo Finance’s Opening Bid (video above).
“There’s a lot of conversation around a K-shaped economy … Nevertheless, spending growth has been happening across all bands.”
The analysis: Mastercard’s first quarter net revenue surged 16% year over year to $8.4 billion. Adjusted EPS came in at $4.60. Revenue for value-added services and solutions, the company’s highest-margin business, shot up 22%. Gross dollar volume climbed 7%, and purchase volume jumped 9% on a local currency basis.
Similar strength was seen out of rivals Visa (V), American Express (AXP), and Affirm (AFRM) in the first quarter, despite warnings of a consumer slowdown.
“Mastercard’s 1Q results were healthy,” said JPMorgan analyst Tien-tsin Huang in a note.
AlphaSpace intel: While we can appreciate the competitive environment and consumer spending concerns swirling around all card players, the fundamentals of Mastercard, Visa, and American Express don’t support the bearishness.
That goes especially for Mastercard, where the stock is down 14% in the past year compared to a 9.5% gain on American Express and an 8.5% drop at Visa. Yahoo Finance AlphaSpace data shows Mastercard’s sales growth has surpassed the 14% level seen seven quarters ago. Operating profit margins are also above the 50% mark.
Bottom line: It could be time for investors to chill out on the AI bubble names and take another look at the card player stocks. Consumer spending is holding up very well in the face of high prices, and all three are playing roles in the AI-driven commerce game.
Brian Sozzi is Yahoo Finance’s Executive Editor and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email [email protected].
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