First Data Corp Given Outperform At Macquarie, Firm Sees Several Catalysts

• Shares of First Data Corp FDC are down 1 percent since they started trading in mid-October.
• Macquarie’s Kevin McVeigh initiated coverage of the company with an Outperform rating and a price target of $20.
• Refinancing of debt and an increase in the Fed fund rate are expected to offer upside to the company’s shares, McVeigh believes.

First Data’s shares have been broadly flat since the company’s IPO in mid-October, versus a 2.5 percent rise in the S&P 500. Analyst Kevin McVeigh said that First Data’s current stock valuation appears attractive and investors are likely to benefit from the interest savings from the recent debt refinancing by the company.

“We believe the FDC stock is poised to rally in 2016 + beyond as First Data has eased viability concerns after deleveraging to a more manageable, albeit high ~6.5x EV/EBITDA + hiring CEO Frank Bisignano in 2013,” McVeight wrote.

First Data’s size, scale, global footprint and extensive distribution channels make the company a leading provider of payment services. The company’s strength lies in the fact that it addresses most parts of the payment cycle through its various services, including merchant acquiring, issuer processing, STAR payment network and e-commerce solutions.

First Data’s stock has historically traded well around Fed rate increases. McVeigh added that the US could witness a gradual increase in the Fed Fund rate.