Deutsche Bank Downgrades Mastercard (MA) to Hold, Prefers Visa (V)

October 10, 2008 7:50 AM EDT

Deutsche Bank downgrades Mastercard (NYSE: MA) from Buy to Hold, saying they prefer Visa (NYSE: V), although they cut estimates and price targets on both.

Deutsche Bank said, "We believe the biggest risk to guidance is onset of a global recession and implications for the consumer."

The firm lowered their price target on Mastercard from $350 to $200 and lowered their price target on Visa from $93 to $72.

The firm cut 2009 EPS estimates on Mastercard from $11.25 to $10.00 and sees 2010 EPS of $12.50. The firm cut 2009 EPS estimates on Visa from $2.91 to $2.75 and sees 2010 EPS of $3.25.

Commenting on the stocks the firm said, "Although we think the current valuation on both names overly discounts these risks, and recent lifting of short-selling ban could alleviate some of the downward pressure as investors now have more places to turn, we think V is the better place to commit new money right now, given (i) its superior position in debit, where the bulk of non-discretionary spending continues to occur at a solid clip, (ii) its lack of exposure to a coordinated recession in Europe given its European subsidiary’s independence, (iii) its better safeguards against potential liability in the upcoming Discover litigation (set to begin 10/14), and (iv) less volatility in the stock given a lower concentration of hedge fund ownership. That said, MA continues to be one of our favorite names, with an ability to protect its earnings stream during tougher times via pricing power/cost rationalization, and MA should outperform most other names in the payment space when sentiment improves."

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• Deutsche Bank
• UBS
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