Friday, January 11, 2008

Mastercard (NYSE:MA): Target lowered to $200 from $250 at Deutsche Bank

- Deutsche Bank is lowering their Mastercard (NYSE:MA) tgt to $200 from $250 following warning from American Express (NYSE:AXP). Firm says they are keeping their Buy rating on the stock as they believe the stock is still a safe haven for long-term oriented investors given tremendous pricing power, massive discretionary cost controls that should enable MA to achieve firm's Street-high EPS, and a strong balance sheet that MA should use to aggressively buy back stock.

Yet, even these considerations may not be enough to overcome what could likely be near-term multiple compression in the wake of AXP's warning, coupled with increasingly negative sentiment in the broader mkt. The higher uncertainty within this turbulent market means that investors will be unlikely to pay the same premium they paid just a few months ago. Firm's revised twelve-month price target (20x 2009 estimate) acknowledges that further multiple compression is possible. Other risks include negative court rulings, regulatory decrees, SEPA delays, and weaker travel trends.

Notablecalls: Well, what does this really mean? It should read something like: "Dear customers, as you are well aware, we have been touting MA as a Buy for quite some time and maybe the loudest when the stock was near its current $220 peak. We do hope you have made money on the long side but would now suggest you take some off the table as we think things will get somewhat ugly. We cannot back off our Buy rating just yet (due our Street high ests) but we are kind enough to let you know what we really think!"

Thanks for the honesty, Chris. Appreciate it.

I think MA will be 15-20 pts lower over the coming weeks. Adjust your risk accordingly. Expect to see bounces along the way, though.

MSCO is out defending MA this AM but they too aknowledge there is very little to be said here.

1 comment:

Murray said...

Dear Mr. Call I am not sure why MA should be higher or lower. I would suggest that their numbers will be very close going forward if not higher, however, I would also suggest technically that this will be going down as the financial blues ( Where's BB King when you need him) will attempt to fill gap Target 1 160 - Target 2 - 151ish.
Mr. Notable .. thanks for blogging.. I appreciate the reference,