UPDATE: Stifel Nicolaus Downgrades Heartland Payment Systems to Sell on Disintermediation Threat

Stifel Nicolaus reduced its rating on Heartland Payment Systems HPY from Hold to Sell. Stifel Nicolaus commented, "Although we generally like HPY's business model and management team, we believe it is most exposed to our disintermediation fears. HPY generates over 90% of its revenue from SME merchants and we expect pricing to collapse in this segment over the next couple of years. … In our sector note, we argue that the disintermediation threat is most acute in the Small and Midsized Enterprises (SME) segment where low-volume merchants face inflated costs and inefficient distribution. While HPY's stronger merchant relationships should help offset attrition, we do not believe it will be immune to industrywide declines in acquiring spreads." Heartland Payment Systems closed at $32.80 on Tuesday.