Guggenheim Downgrades Worldpay After Strong Rally

Shares of Worldpay Inc WP have appreciated around 28 percent since the beginning of the year versus an 11-percent increase in S&P.

The good news related to results and projections are now reflected in the share price, according to Guggenheim.

The Analyst

Guggenheim’s Jeff Cantwell downgraded Worldpay from Buy to Neutral.

The Thesis

Regardless of how Brexit pans out, Worldpay is likely to witness growth headwinds in the UK in the back half of 2019 and beyond, Cantwell said in a Monday note. 

Some appreciation is expected in the shares of high-quality payment companies, the analyst said. Yet the rally since the beginning of 2019 has come as a surprise, he said. 

While many of the stocks are trading at a premium valuation, their performance in 2019 is unlikely to be as strong as in the previous year, Cantwell said. 

Payments companies are likely to face a meaningful slowdown in growth in Europe, in the analyst's view. Worldpay generates around 20 percent of its total net revenue in the UK, and Brexit-related woes could affect revenue growth over the next few quarters, he said. 

The company’s guidance reflects a stable UK economy in 2019, which is likely to hold true, Cantwell said. 

Guggenheim reduced its EPS estimates for 2019 and 2020 from $4.65 to $4.60 and from $5.48 to $5.40, respectively, to reflect UK growth headwinds.

Price Action

Worldpay shares were down 0.42 percent at $97.31 at the time of publication Monday. 

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