KeyBanc Raises Price Target on MasterCard (MA) to $350

KeyBanc raises its price target on MasterCard (NYSE: MA) from $325 to $350 while maintaining a Buy rating.

Following MasterCard's second annual analyst day yesterday, the firm has become more positive on the company's growth opportunities. KeyBanc said MasterCard management discussed reasons why the company has performed so well recently and "provided ample reason to believe this success will continue..."

KeyBanc took away several potential catalysts for MasterCard:

• continued substantial non-U.S. growth opportunities;
  
• signs of progress in Europe arising from the Single European Payments Area (SEPA) initiative;
  
• the difficulty of building an alternate payments network;
  
• MA's U.S. debit initiative; and
  
• room for continued substantial margin improvement.

Interestingly, MasterCard pointed out that the card payments industry has been around for 40 years in the U.S., but, as of 2006, only about half of payment transactions came from plastic payments. Moreover, the U.S. appears to be one of the front runners in this trend as the percentage of paper-to-card transactions is much lower in most other markets. Electronic payments made up just over 5% of all consumer payments globally in 2006.

The firm said its $350 price target on MasterCard is based on a P/E of 35x its FY09 EPS estimate, which is only a slight premium to its peer group average multiple of 31.5x FY09 estimates.

MasterCard Incorporated, together with its subsidiaries, provides transaction processing and related services to customers principally in support of their credit, deposit access, electronic cash and automated teller machine payment card programs, and travelers cheque programs.

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