Piper Jaffray Cuts MasterCard (MA) Estimates and Price Target on China Investment

Piper Jaffray analyst, Jason Deleeuw, cut MasterCard (NYSE: MA) earnings estimates by 2% to reflect expectations for higher expenses but talks down revenue in the process. The price target drops by 2% as well from $123 to $120 but the Overweight rating remains.

EPS estimates for ‘15/’16/’17 go from $3.40/$3.90/$4.56 to $3.32/$3.80/$4.45 reflecting a clean-up of our 2015 OPEX growth forecast (5.2% now vs. 3.5% previously). The increase in ’15 OPEX growth to 5.2% vs. 3.5% previously is to better reflect MA’s guidance and continued elevated investment spending for China and digital/mobile.

Although this isn't the reason for the estimate cut, he has become slightly more conservative on net revenue and margin outlooks as well. FX headwinds continue, a muddle along global growth environment continues and U.S. retail sales ex auto growth trends is bouncing around at low levels. Consumer confidence across the Eurozone region has improved modestly since October 2015 though remains tempered.

Note that the analyst's $0.69 4Q15 estimate is $0.03 below consensus of $0.72.

Despite the more conservative outlook, he is constructive on MA given L-T growth opportunities (global secular shift to electronic payments, European processing share and price catalysts, China, mobile) and expectations for mid-teens L-T EPS growth.

No change to Overweight rating but the PT drops from $123 to $120 based on 27x a new ’17 EPS estimate of $4.45.

For an analyst ratings summary and ratings history on MasterCard click here. For more ratings news on MasterCard click here.

Shares of MasterCard closed at $98.87 yesterday.

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