BMO Sees 22% Upside In Worldpay After Vantiv Merger

Payment processor Worldpay Inc WP, which was formed in the merger of Vantiv and the U.K.'s Worldpay plc, is likely to benefit from higher 2019 earnings per share and a higher multiple, according to BMO Capital Markets. 

The Analyst

BMO Capital Markets analyst Paulo Ribeiro upgraded Worldpay from Market Perform to Outperform and increased the price target from $71 to $95, suggesting roughly 22-percent upside from current levels.

The analyst also named Worldpay as one of his top picks along with First Data Corp FDC.

The Thesis

Worldpay is poised to report higher 2019 earnings per share thanks to the M&A deal, Ribeiro said in a Wednesday note.

"P/E benefits from [an] improved revneue growth profile and margin expansion on added scale, industry-leading omnichannel and integrated capabilities and further vertical/SMB opportunities," the analyst said. 

Ribeiro also sees upside from lower assessment fees and the company's tax bill benefit, which is estimated to add 5-7 percent to earnings per share and more TRAs.

Although BMO Capital Markets sees challenges related to platform integration, Ribeiro said faster-to-market innovations, lower-cost processing and reduced CapEx will benefit the combined company after the initial integration investment.

"Combination supports higher multiple with compelling opportunities, in particular in e-commerce and SMB," he said.

The Price Action

Worldpay, formerly Vantiv, shares are up over 25 percent over the past year. The stock was up 1.49 percent at $79.05 at the close Thursday.

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