asterCard International recently became MasterCard Worldwide. Coming on the heels of the card Association's stock-market debut, the name change is accompanied by a new corporate tagline, "The Heart of Commerce."

"The new corporate brand better represents the globally integrated structure and unique insights that MasterCard leverages to deliver business value to our customers, merchants, consumers and shareholders," stated Chief Marketing Officer Lawrence Flanagan in a June 2006 company release. In recent weeks, at least 12 financial institutions have launched coverage of the stock, with little agreement on whether shareholders should buy, hold or sell.

Morgan Stanley Analyst Kenneth A. Posner is one of four experts who issued a strong buy rating. He put the target price at $56. The stock has been trading between $40.20 and $50.63 since its debut May 25. Conversely, Credit Suisse Corp. gave it an underperform rating. Even more pessimistic, Stifel Nicolaus Analyst Chris Brendler advised shareholders to sell, giving a valuation of $40. "The combination of growing strategic risks and legal costs are likely to reduce future cash flow," he wrote in a report issued July 6.

Disintermediation

Brendler's comments are ominous for issuing banks and processors, not to mention any plans that Visa U.S.A might have for going public. Now that MasterCard's bank customers are no longer majority owners, Brendler thinks "the increasing consolidation among merchants, issuers and acquirers will lead to margin pressure and increases the risk of disintermediation."

According to Brendler, the brand also faces increasing competition from American Express Co. and Discover Financial Services. But its biggest risks are legal: lawsuits filed by AmEx and Discover, and the merchant class action. "We believe the biggest overhang is the merchant interchange suit," which could mean "potentially devastating damages" for the company, Brendler wrote.

Posner estimated MasterCard's litigation exposure at $1.6 billion, and noted that a settlement probably would mean lower future interchange fees rather than massive damage awards.