Mastercard Buys Finicity For $825 Million; Top Analyst Cuts Rating

Mastercard Inc. (MA) said on Tuesday that it entered into an agreement to buy financial data firm Finicity for $825 million.

Under the terms of the agreement, Finicity’s existing shareholders will receive an earn-out of up to an additional $160 million, if performance targets are met. The deal, which is expected to close by year’s end, is still subject to regulatory and other customary closing conditions.

Mastercard said the acquisition is aimed at strengthening and expanding its open banking services, which gives individuals and businesses more control over their financial data. This includes determining how and where third parties – such as fintechs or other banks – can access that information to provide new services like money management programs or initiate payments on their behalf.

“Open banking is a growing global trend and a strategically important space for us. With the addition of Finicity, we expect to not only advance our open banking strategy, but enhance how we support and accelerate today’s digital economy across several markets,” said Mastercard president Michael Miebach. “Finicity has a proven business, built on partnerships with thousands of banks and fintechs, similar to us.”

Mastercard added that the acquisition will help expand its open banking solutions reach to North America and other key geographies. Today, the company’s open banking services in Europe are connected to more than 1,800 financial institutions.

The deal is not expected to be incrementally dilutive to its business for more than 2 years, Mastercard said.

Since plunging to a multi-year low in March, Mastercard shares have rallied some 51%, recovering all of this year’s losses. The stock rose 1% to $307.45 in Tuesday’s morning trading.

Meanwhile, five-star analyst Glenn Greene at Oppenheimer today lowered the stock’s rating to Hold from Buy, saying that he believes that rival Visa (V) is more likely to take market share/ accelerate growth in Europe as momentum builds.

“We downgrade MA as we see headwinds to balance sheet light-financial/fintech firms vs. balance sheet-dependent firms (growth vs. value) and believe V is set to recapture lost market share/penetration in Europe while also closing the P/E multiple gap,” Greene wrote in a note to investors. “We also think the perceived tech/functionality for value-added services and ability to serve as a network of networks/multi-rail gap is likely to close, as MA had a bit of a head start.”

The rest of Wall Street analysts are mostly bullish on the stock. The Strong Buy consensus boasts 16 Buy ratings versus 3 Hold ratings. In light of the recent share rally, the $319.12 average price target implies a modest 4% upside potential over the coming year. (See Mastercard stock analysis on TipRanks).

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