Card issuer Marqeta is a buy and can go up 54% from here, Morgan Stanley says
Morgan Stanley claims that investors are “overly punitive” on Marqeta, a card-issuing firm. Morgan Stanley analyst James Faucette upgraded Marqeta from an equal weight to overweight, stating in a Tuesday note the company’s “crucial infrastructure” for digital commerce. The note stated that the company’s clients include industry leaders like JPMorgan and Uber, as well as Square. Faucette stated that MQ has a high-quality customer base, which makes it vulnerable to the most lucrative digital commerce trends. MQ also has a strong business model that establishes MQ’s competitive position. We don’t believe that MQ’s growth trajectory and competitive advantages make it a good choice for valuation. Morgan Stanley set a price target of $15 for the company. This is 54% higher than Monday’s closing share prices. Analysts noted that Marqeta’s platform for card issuing, where clients can customize their payments, helped to accelerate the company’s growth in recent years. The analysts noted that customers who have third-party verification of more than $500 million increased by double in the quarter to 2022 compared with the previous year. Analysts think the valuations of Marqeta are undervalued due to its “stable unit economy” and excellent gross margin performance. Marqeta’s shares are currently down 43% since its public offering last summer. Morgan Stanley projects that the company will post an operating cash flow loss of $67.2million in 2022. However, it expects cash generation to be $19.6million in 2023 and adjusted EBITDA balance of zero in 2024. “With this context, MQ’s highly defensive balance sheet – over $1.6bn in net cash – allows management to leverage a flexible approach to capital allocation with minimal cash burn risk. MQ will be able to achieve their adj of 20%+, and we are optimistic. Faucette stated that EBITDA margin targets have been met in the past. In Tuesday’s premarket trading, Marqeta shares edged up. —CNBC’s Michael Bloom contributed to this report.