Friday, June 15, 2007

Mastercard (NYSE:MA): Estimates upped to new Street high at SunTrust

- SunTrust is reiterating their Buy rating on Mastercard (NYSE:MA), raising 2007 and 2008 revenue and EPS estimates and boosting 12-month target price to $185 from $175. Firm notes they remain bullish on MA and have moved aggressively above Street mean estimates. New 2007 and 2008 revenue and EPS estimates are now at $3,912 million and $5.25 and $4,418 million and $6.43, respectively (consensus EPS stands at $4.78 & $5.75, respectively).

Their growing bullish conviction reflects a constructive view of the company's exposure to strong transaction growth, its considerable pricing power and meaningful operating leverage. It is their opinion that the Street continues anticipating a deceleration in transaction and revenue growth which is not in the offing.

The company benefits from secular shift from cash to electronic payments at the point of sale, exposure to strong cross-border travel trends, proliferation of new payment modalities and the emergence of burgeoning international economies with little historical electronic payments volume. SunTrust argues that MasterCard is moving into "harvest" mode in the US. The domestic market, which will comprise nearly 50% of the company's 2007 GDV, is relatively mature. As a result, they believe the company will re-direct its advertising spend toward rapidly-growing emerging markets, which should require lower absolute expenditures. This is one factor suggesting potentially greater-than-expected operating leverage and EPS upside.

Notablecalls: Looks like SunTrust EPS numbers are the new Street high. Given the strong chart, I expect to see buy interest in MA today.

1 comment:

Zach said...

Amazing that even with the significant increase, the valuation is still reasonable given the growth trajectory. People like me on the sidelines are getting more and more impatient waiting for a pullback and will probably continue to be disappointed.