Markit Ltd Surges On Morgan Stanley Upgrade

Morgan Stanley upgraded Markit Ltd MRKT from Equal-weight to Overweight and maintained a $29 Price Target.

Analysts led by Suzanne E. Stein noted that a “30 percent upside to our PT makes Markit a risk worth taking despite near-term concerns over the transition to electronic trading. The stock is now 18x ’15e EPS vs. analytics peers of ~20x.”

Stein commented that Markit “has a stable business model with high recurring revenue and >90 percent renewal rates” and that the “financial profile is attractive, with mid- single-digit rev growth and ~$250M in annual FCF” along with “an experienced management team.”

Risks cited in the report include potential revenue volatility, the shift to electronic trading,  ownership by financial institutions, and anti-trust litigation.

The report’s Bull Case scenario saw a potential upside price of $34 and a Bear Case scenario at a $19 price.

Markit Ltd recently traded at $22.33, up 1.68 percent.