Why Amazon's Purchase Of Whole Foods Will Be A Slight Negative For Vantiv

Amazon.com, Inc. AMZN's proposed acquisition of Whole Foods Market, Inc. WFM is a "mild negative" to Vantiv Inc VNTV, according to analysts at Baird.

Baird's David Koning maintains an Outperform rating on the payment processor with an unchanged $72 price target as Amazon may chose not to use Vantiv's products and services when it fully assumes control of the organic and grocery chain.

What's Up With Vantiv

Currently, Whole Foods accounts for around 0.15 percent to 0.20 percent of Vantiv's business and Amazon may elect to use Paymentech for processing transactions. As such, a trade down in Vantiv's stock following the acquisition announcement was somewhat justified.

However, Vantiv boasts a well-diversified business and the company's five biggest clients represent 7 percent of total revenue and the top 10 clients account for 8 percent of total revenue, Koning noted. In fact, 50 percent of the entire Merchant segment revenue isISV/eComm/bank related and growing by a mid-teen digit.

Vantiv also boasts a high-single digit organic revenue growth rate and a history of delivering 19–22 percent earnings per share growth each year from 2014 through 2017. While the analyst is now modeling a 12-percent growth rate in 2018 this figure could prove to be conservative and likely to rise.

Bottom line, Vantiv's stock trading near $60 to $61 per share represents a multiple that is merely in-line with the S&P's NTM (next twelve months) multiple and Vantiv is "much better than an average S&P company)."

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