Duncan-Williams Initiates Coverage on Mastercard (MA) with a Buy; Attractive Play, But Disadvantaged Vs. Visa Debit Business

July 7, 2009 10:03 AM EDT

Duncan-Williams initiates coverage on Mastercard (NYSE: MA) with a Buy. Price target $200.

Duncan analyst says, "In our view, MasterCard remains an attractive play on the global secular growth in card-based payments and we believe the stock's 23% discount (based on 2009E P/E) to Strong Buy-rated Visa (NYSE: V) and comparable valuation with Buy-rated Global Payments (NYSE: GPN) represents good value. Although current operating margins are already running above 40%, we still see margin expansion ahead for MasterCard. In short, MA's network is built and paid for so the company is able to process additional transactions at very low incremental costs. The company should continue to benefit from technology cost efficiencies while improving its marketing productivity as well.

MasterCard continues to demonstrate pricing power...MA has significant flexibility with its expense base...On the negative side, we believe that MA is disadvantaged relative to Visa with substantially less debit market share in the U.S. and MA's market share is set to decline further with the loss of Washington Mutual's debit portfolio...We are establishing 2009 and 2010 EPS estimates of $10.85 and $12.65, respectively."

To see more analyst ratings on MA Click Here.

MasterCard Incorporated (MasterCard) is a global payment solutions company that provides a variety of services in support of the credit, debit and related payment programs of over 24,000 financial institutions and other entities that are its customers.

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