Goldman downgrades Yandex, MTS on cost of capital worries

|By:, SA News Editor

Goldman has downgraded Russian search king Yandex (YNDX -1.2%), as well as Russian mobile carriers MTS (MBT +0.2%) and MegaFon, to Neutral.

The firm is worried about a rising cost of capital for Russian firms amid rising local interest rates and evidence of higher borrowing costs. In Yandex's case, Goldman argues the company's high P/E - shares go for 21x 2015E EPS - makes it especially vulnerable to a cost of equity increase.

At the same time, Goldman thinks Yandex will continue to benefit from improving monetization and Russian online ad growth, and believes its contextual ads will be relatively immune to macro headwinds.

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