Monday, December 31, 2007

Mastercard (NYSE:MA): Visa’s FY07 Price Increases Support Our Pricing Power Thesis on MA - Morgan Stanley

Morgan Stanley is out positive on Mastercard (NYSE:MA) saying data from Visa Inc.’s latest SEC filings indicate that Visa strongly raised prices over its past fiscal year. This gives the firm increased conviction in their pricing power thesis on MA.

For the year ended September 30, 2007, Visa Inc. revenue grew 33% year-over-year; fully 11% came from direct price increases to its customers. Another 5% emanated from reducing rebates to its bank and merchant customers, a symbol of pricing power in firm's view. During the same period, MA revenue rose 20% year-over-year, with 3% coming from price increases

MSCO believes on average, Visa prices slightly below MA. Price increases from Visa should make it easier for MA to raise its prices, in turn.

2008, they think MA could enjoy flat to up pricing year-over-year, fueled by Visa raising prices (in connection with its planned IPO) and MA’s strong competitive position. Reits Overweight on MA.

Notablecalls: Well, it's certainly going to be a slow day today. Nevertheless, I suspect MSCO's comments will generate some early interest in MA.

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