Mastercard Inc (NYSE:MA) has lowered the quarterly revenue growth forecasts because of the growing menace of the coronavirus. The looming coronavirus is curtailing international travel and biting e-commerce. According to a communiqué from the credit card network, it expects a drop of 2 to 3 percentage points from its earnings call aired on January 29, 2020. The shares of Mastercard trades lower at $302.89 (down 6.76%) on Tuesday after an increase in infections in nations that include Italy and South Korea. Visa Inc’s shares also trade lower at $188.40 (down 5.17%).
Coronavirus affects cross-border travel
In a statement issued by Mastercard, cross border travel is impacted by the spread of coronavirus to various nations outside of China that include South Korea, Iran, and Singapore. The spread of coronavirus has also affected the cross border e-commerce growth to a lesser extent. It is too early to predict how long the coronavirus impact will continue. The staff at Mastercard said they are closely monitoring the situation.
E-commerce takes a hit
According to a short-lived forecast, the impact of coronavirus is quickly changing the behavior of consumers even outside China. The executives at Mastercard early presumed that most of its business from China is e-commerce and expects comfortable growth. However, the coronavirus menace is also showing its effects on e-commerce growth.
Sachin Mehra, Chief Finance Officer of Mastercard, said the company provides some form of a hedge in a chat with the analysts on January 29, 2020, on the backdrop of the earnings call. But, Ajay Banga, Chief Executive Officer of Mastercard, has cautioned and said the firm would revisit those numbers if coronavirus spreads to more parts of the world.
Mastercard said if coronavirus impact is limited to Q1, the growth of its annual revenues would be at the lower end of the low teen’s range. Al Kelly, Chief Executive Officer of Visa, said it is too early to predict the impact of coronavirus on its earnings. He said the planes ‘From’ and ‘To’ of China halted and the hotels in China are full and affect the supply chains, it may harm its results.
United Airlines Holdings Inc on Monday withdrew its profit forecast for 2020 amid the growing coronavirus menace across the world. In South Asia, Royal Caribbean, a cruise operator, has canceled 30 cruises because of the outbreak of coronavirus.
The total number of coronavirus cases in South Korea has surged to 1,146, an increase of 169 new cases.