New York City Stocks
Financial medallion were crushed by start-up Uber Technologies, now Gotham’s largest taxi operator.
The company is a leading lender to individuals and businesses seeking to own and operate yellow cabs through the purchase of a Medallion, which is awarded by the New York City Taxi and Limousine Commission and allows drivers to take charge of passengers who hail them in the street. In total, there are only about 13,000 lockets available, which has sometimes made it a very safe product to lend. At their peak in 2014, New York City medallions cost $ 1.3 million.
Uber stopped in 2011, and its influence began to grow with the popularity of smartphones. Its drivers do not need medallions because the company presents itself as a communication network not subject to transport regulations.
Uber’s promise of easily calling a car through a smartphone and the possibility of a lower fare has proven to be extremely appealing to passengers and devastating for medallion prices. Recently, a medallion was valued at $ 875,000, down about 30% from the peak. Lenders, including Medallion, have waived further loans to them.
Medallion stocks (ticker: TAXI) did much worse than the medallions, plunging from a recent high of $ 17.74 in late November 2013 to $ 6.25, about six times estimated earnings, and barely 60% of the book value. The dividend yield reached 15.7%. It may sound dangerously high, but Medallion chairman Andrew Murstein insists the chances of cutting it are “slim to none”.
The sale seems exaggerated, amplifying the effect of Uber and obscuring the rest of Medallion’s business. Sandler O’Neill analyst Alex Twerdahl has a buy on the shares and a price target of $ 12. âEven with the drop in medallion values, revenues have not been affected,â he wrote.
Analysts estimate Medallion’s earnings for this year will reach nearly $ 17 million, or $ 1.08 per share, on $ 45 million in sales, compared to $ 16 million, or $ 1.24, on $ 45 million. in sales dollars in 2016.
The total ridership of yellow taxis has decreased, but it has not fallen. The number of trips fell 8% to 165 million in 2014, from a peak of 179 million in 2012, according to TLC data. This reduced yellow taxi revenues by just 1.7%, to $ 2.39 billion in 2014, from a peak of $ 2.43 billion in 2013. Indications are that 2015 revenues are flat or declining. slight decrease.
“Yellow cabs just aren’t going to take the hit the media is suggesting,” said Matthew W. Daus, partner at Windels Marx, a transport law firm.
And this does not reflect the activities of Medallion Financial. As aggressive lenders, like
Capital One Financial
(COF), entered what appeared to be a secure and growing market a few years ago, Medallion has limited its risk by tightening its credit standards. âWe thought the medallion prices were getting high, so we lowered our loan-to-value ratios,â says Murstein. Her LTV ratio is 75%, and she has not recorded a loss on any of her medallion loans, all of which come with personal guarantees from the borrower.
Murstein diversified over a decade ago. Despite objections from some shareholders, he began to lend to dry cleaners and laundromats, and bought a company specializing in high-interest financing. In 2003, he established the Medallion Bank in Utah, which provides home improvement loans, provides credit to recreational vehicle dealers, and offers Medallion loans. A year later, he bought an RV and Marine Lender at
National Leucadia (LUK). âIt’s ironic,â says Murstein. “[Some investors] spent all these years opposing our diversification, and now they are wondering why we should stay in the medallion lending business.
Consumer loans accounted for 40% of loans under management and 64% of Medallion’s earnings in the second quarter. Cab Medaillon loans, approximately 70% of which are made in New York, remains a significant business segment with 51% of loans managed, but only represents 19% of interest income. The loss rate on Medallion’s total portfolio is 1%. Overall, revenue grew about 20%, to $ 22.7 million, in the first six months of 2015 from a year ago level.
âPeople have certainly overestimated Medallion’s troubles,â says Sam Stewart, president of Wasatch Advisors of Salt Lake City and director of its operations.
(WASIX), who bought the title. âThis Uber thing is overkill. Uber is not going to drive taxis out of business. It’s both, not one or the other.
Murstein also increased the share buyback authorization to $ 26 million, to counter a significant short position of 3.3 million shares, or 15% of the free float. A report from Twerdahl states, âAs the company continues to pay its dividend and buy back shares, the short-term interest will disappear. “
Uber, backed by Amazon.com founder Jeff Bezos, has some issues. The status of its drivers as contractors, rather than employees, has been challenged in the courts and questions have been raised regarding their insurance and qualifications.
New York taxis have faced all kinds of rivals, from limousines and green taxis with limited travel parameters to dishonest drivers. Uber will take its share of the livery market, but it’s unlikely to wipe them out.
This is in part due to the courage of immigrants like Abwabul Chowdhury, 48, who arrived in New York City from Bangladesh in 1985. He and a friend bought a locket and paid off their loan by driving their cabs almost 24 hours a day. Chowdhury estimates that the arrival of Uber forces him to work 20% harder to earn the same money as before. âThe towers of world trade have collapsed, but look, the tower of freedom has risen in its place. I stay with a yellow taxi. It will be there, come what may, âhe said.