Jefferies: M&A, Tax Reform Drive Vantiv Upside

Payment processor Vantiv Inc VNTV notched an upgrade and price target increase Thursday from Jefferies. 

The Analyst

Jefferies analyst Ramsey El-Assal upgraded Vantiv from Hold to Buy and increased the price target from $72 to $94.

The Thesis

The WORLDPAY GRP PLC WPYGY acquisition brings Vantiv a better business mix and dilutes some existing problematic concentrations, analyst El-Assal said in a note. (See El-Assal's track record here.) 

The deal could help drive up volume from higher-growth digital and integrated distribution channels while also expanding Vantiv's footprint into  international markets, the analyst said. 

Vantiv could see upside from incremental merger synergies, according to Jefferies.

Vantiv's merger cost synergy targets are conservative, El-Assal said, and Jefferies projects additional upside in revenue synergies from cross-selling Worldpay's ECOM solutions in the U.S.

Vantiv is also projected to benefit from the potential passage of U.S. tax reform, the analyst said. 

Vantiv shares deserve a premium valuation due to the improved mix and synergy-driven earnings beats, El-Assar said. Tax reform is expected to boost earnings per share by 7 percent, making the valuation more compelling, he said. 

The Price Action

Vantiv shares are up over 25 percent year-to-date, with interest in the stock perking up following the Worldpay deal. 

Vantiv was up 1.83 percent at $74.94 at the time of publication. 

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