Markit Ltd. (NASDAQ: MRKT) saw a strong initial public offering (IPO). After pricing at $24, shares initially rose to about $26.50. Now the analyst quiet period has officially ended, and the ratings outlook is less than favorable.
Markit is now one of the top data providers on Wall Street. The firm offers data on foreign exchange, credit and derivatives, as well as data on bonds and loans. Despite revenue of almost $948 million and earnings of $147 million last year, it turns out that analysts are cautious on Markit.
That warning from the Wall Street Journal on June 19 sure rings a bell now — beware buying when Markit’s makers sell.
This is the coverage and price target montage we have seen so far on Monday, with shares closing at $26.88 on Friday:
- Started as Buy at Bank of America Merrill Lynch with a $32 price target (a street high)
- Started as Buy at Deutsche Bank with a $29 price target
- Started as Equal Weight at Barclays with a $30 price target
- Started as Equal Weight at Morgan Stanley with a $29 price target
- Started as Neutral at UBS with a $28 price target
- Started as Neutral at Citigroup with a $28 price target
- Started as Neutral at Goldman Sachs with a $27 price target
- Started as Neutral at J.P. Morgan with a $27 price target
As Merrill Lynch was the street high call with a $32 price target, we wanted to see what their report had to say. The firm’s outlook is based on Markit’s predictable business model, strong brand and high-margin profile as key attributes. The firm also expects positive earnings revisions to drive the shares higher. Merrill Lynch also sees earnings upside without modeling for acquisitions, despite 26 deals since 2003. The risks to its thesis are a higher-than-expected negative impact from electronic trading of vanilla swaps, as well as pending legal proceedings.
Since the IPO in June, Markit shares have traded in a range of $26.06 to $27.45. Shares closed at $26.68 on Friday and shares opened Monday around $26.50 on such cold analyst coverage.