BofA: Merger Synergies A P&L Accelerator For Worldpay

Payments solution provider Worldpay Inc WP was formed in 2018 through the combination of merchant acquirers Vantiv and Worldpay Group. Notwithstanding the recent upward move, an analyst at Bank of America Merrill Lynch still sees a buying opportunity.

The Analyst

Jason Kupferberg upgraded Worldpay from Neutral to Buy and increased his price target from $106 to $118.

The Thesis

Management's synergy projections, especially on costs, are conservative, likely driving a multi-quarter cycle of upward estimate revisions, Kupferberg said in a Wednesday note.

These synergies, according to the analyst, represent a P&L accelerator, justifying the raising of target multiple for Worldpay above that of the comps. The analyst named the stock as his favorite among merchant acquirers.

The 15-percent market share for the company among the top 21 global Internet companies suggests significant penetration potential, Kupferberg said. Therefore, the analyst is highly confident in the company's ability to achieve $100 million annualized revenue synergy target, exiting 2020.

"By mid-2019, we believe the 3-year target of $200M in cumulative cost synergies could be accelerated and/or increased, as the migration of WP's US clients to the legacy Vantiv platform is completed," BofA said. As such, the firm raised its 2019 and 2020 adjusted EPS estimates to $4.79 and $5.49, respectively from $4.70 and $5.39.

Price Action

Worldpay shares have gained around 36 percent in the year-to-date period.

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