Wells Fargo Downgrades Mastercard to "Market Perform"; Valuation Call (MA)

Wells Fargo Downgrades Mastercard to “Market Perform”; Valuation Call (MA)


Credit card issuer Mastercard Inc. (MA) on Friday received a big downgrade from analysts at Wells Fargo.

The firm cut its rating on MA from “Outperform” to “Market Perform” with a $500 to $520 valuation range. That range suggests essentially zero upside to the stock’s Thursday closing price of $518.40.

A Wells Fargo analyst commented, “Despite a solid quarter with particular strength in underlying volume and transaction metrics, we are downgrading our rating to Market Perform due solely to valuation. We believe the strong run in shares of MA since the beginning of 2011 (up 131% vs. up 19% for the S&P 500) and resulting expansion in valuation multiples (MA currently trades at 20.3/16.9 times our 2013/2014 EPS estimates) has created a scenario where we believe the opportunity for MA to significantly outperform is limited during the near-term. Our valuation range of $500-520 is unchanged. Our 2013 EPS estimate is moving down to $25.57 from $25.80. Our 2014 EPS estimate is $30.59, implying growth of 20% for 2014.”

Mastercard shares posted modest gains in premarket trading Friday. The stock has surged more than 48% in the past year.

The Bottom Line
Shares of MA currently offer a 0.23% dividend yield, based on the company’s annualized dividend payout of $1.20 per share and the stock’s Thursday closing price of $518.40.

Mastercard Inc. (MA) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks, as well as a detailed explanation of our ratings system here.

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