Marqeta's stock is now a buy as it sits in an 'enviable' spot, BofA says

By Emily Bary

Marqeta shares have lost ground this year, but BofA says the recent selloff looks 'overdone'

Marqeta Inc. shares powered 5.7% higher Monday as the card-issuing name found a new fan on Wall Street.

BofA's Cassie Chan upgraded the stock to buy from neutral earlier in the day, saying that Marqeta (MQ) boasts the "enviable combination" of near-term visibility into its financials and emerging opportunities that could help spur 20% growth over the medium term.

Chan noted that customers representing 75% of Marqeta's total payment volume renewed deals between the second quarter of 2022 and the third quarter of 2023, and that numerous big clients have attractive growth outlooks. Block Inc. (SQ), DoorDash Inc. (DASH) and Affirm Holdings Inc. (AFRM) are each expected to grow revenue between 15% and 20% over the next two years, she noted.

See also: This Block catalyst could send the stock soaring 20%, says analyst

Marqeta seeks to modernize the process of issuing cards, and the company is working with Block on the Cash Card debit card that's tied to its Cash App. Marqeta also helps companies that have unique needs for cards, including gig-economy players like DoorDash that need to ensure that workers shopping on behalf of customers can pay for the items in those orders - but nothing else.

Read: Here's why debating Affirm's valuation may be 'fruitless'

While the company's business has been debit-focused thus far, Chan sees opportunity for the company as it makes more of a push into credit. Analysts aren't fully baking that potential into estimates for 2025 and 2026, in her view.

The company's recent announcement about the launch of the Sunwest Visionary Card illustrates its "ability to partner with banks and win in the commercial card market," she wrote.

Marqeta shares have dropped more than 12% so far this year, but Chan thinks their recent weakness is "overdone." Her $7 price objective is 15% above Monday's closing levels, although it was 21% above where the stock closed Friday, before shares rallied on the heels of the upgrade.

-Emily Bary

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02-12-24 1644ET

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