Goldman Removes Vantiv From Buy List, Downgrades To Neutral

Shares of Vantiv Inc VNTV fell more than 2 percent after Goldman Sachs removed the stock from Americas Buy List and downgraded to Neutral as it sees less upside in the stock at 6%, below average coverage upside of 10 percent.

However, Goldman said there is no change to its constructive view on fundamentals of Vantiv, which provides digital payment processing services.

"We continue to see it (Vantiv) as a structural market share gainer in merchant acquiring, and think it is well positioned to further extend its position in the SMB market as a result of the Mercury acquisition," analyst James Schneider wrote in a note.

The analyst, who maintained his $57 price target, also hailed the company's strong iPOS position and under-penetrated SMB position.

"We believe Vantiv's core merchant acquiring business remains poised to continue outpacing peers over the coming year, with (1) the Mercury acquisition providing a significantly enhanced foothold in integrated payments, where we see growth of ~20% as achievable through 2017 and, (2) opportunity for improving traction in the under-penetrated SMB market given Vantiv's historical exposure to larger merchants," Schneider continued.

The analyst views the continued momentum in Vantiv's high-growth integrated payments channel as encouraging, and highlighted 14 percent year-over-year Merchant Services growth in the fourth quarter of 2015 (20 percent growth for integrated payments including Mercury).

"We continue to see a strong pipeline of merchant bank wins supporting revenue growth. We expect recent merchant bank wins (including Rabobank, Umpqua, and Capital One) to support Vantiv's merchant acquiring growth in 2016," Schneider added.

But, the analyst now sees risk/reward as more balanced at current levels as it believes investor sentiment has improved commensurate with the expansion in the stock's multiple. Since Goldman initiated the stock at Buy on July 8, 2014, shares are up 58 percent.