J.P Morgan Raises PT On Mastercard; Sees Brighter Future

MasterCard MA reported strong 4Q10 results of $3.16, exceeding JPM/Street est. of $2.83/$3.05, aided by revenue upside, lower taxes and higher other income overcoming higher expenses. Purchase volumes and revenues were well ahead of our views, but offset by higher opex. Strength in international volume and deal momentum hold promise for outlook. JPM is raising its estimates and Dec 2011 PT to $285 and remain Overweight based on its view that the impact from debit interchange reform is manageable with potential for share gains. Settlement sharing agreement also helps dissipate some of the stock's litigation overhang, helping drive yesterday's outperformance despite the 4Q operating miss. With 4Q behind us, JPM remains Overweight on both MA and Visa V, and go back to a relative preference for MA until debit rules are finalized. CEO expressed disappointment with the Fed's draft rules, and is seeking changes to the proposal. MasterCard has had discussions with legislators and regulators to educate them on potential unintended consequences and harm to consumers and the industry. MasterCard believes the impact on its debit business is manageable with ~14% of revenues at risk. MA closed Thursday at $245.39