Prudential is upping their tgt on MasterCard (NYSE:MA) to $130 from $100 saying the revised target equates to approximately 26 times 2008 pro forma EPS estimate, up from prior target multiple of 20.
Higher long-term earnings growth fed into firm's 10-year DCF-based equity valuation model is the primary driver. They now project 16.4% CAGR of net income, up from prior estimate of 14.0%.
Firm projects that gross dollar volume [GDV] at MasterCard will grow 14% in 2007 and 13% in 2008. Our forecasts of processed transaction growth are 17% in 2007 and 15% in 2008. They believe that the competitive landscape would be relatively stable near-term, as two major card networks (Visa and Discover) prepare to become publicly-traded companies over the next several quarters.
4Q06 pro forma EPS estimate remains $0.40. Firm forecasts yr/yr net revenue growth of 18.5% in 4Q06 with GDV growth of 15.0% and transaction volume growth of 19.5%. They continue to expect a smaller than usual sequential increase in marketing expenses, as they believe that the company has allocated proportionately larger share of annual marketing expenses to 2Q06 due to the World Cup promotion.
Notablecalls: Love the chart. The tgt raise is big enough to create some buy interest. Going to call this one actionable here as MA is a mover.