Medallion Financial (NASDAQ:TAXI) is off 65% from a recent top hit less than two years ago, including a halving in the stock price in just the last year. At the current price of $6.17, TAXI sells for about 6x estimated earnings and at just 60% of book value. The dividend yield is roughly 16%, and Medallion President Andrew Murstein calls the chances of it being cut “slim to none.”
“Even with medallion values having declined, earnings haven’t been affected,” says Sandler O’Neill analyst Alex Twerdahl, arguing the concern over Uber has obscured the rest of the company’s businesses. He rates the stock a Buy with a price target of $12.
The company began diversifying away from medallions more than a decade ago (a move it was criticized for at the time). Consumer loans accounted for 40% of managed loans in Q2, and 64% of earnings.
Medallion loans account for 51% of managed loans, but just 19% of interest income. What’s more, taxi cab ridership may not be going away. The number of yellow cab rides slipped 8% to 165M in 2014 from a peak of 179M in 2012, but revenue fell just 1.7%. The early data for this year has revenue as flat to down slightly.
“This Uber thing is overdone,” says mutual fund manager Sam Stewart. “Uber isn’t going to drive taxis out of business. It’s both – not either/or.”
So considering the overall outlook and views of analysts, buying the calls options in TAXI stock could be a good strategy in mid to long term.