CLSA Says Buy The Dip In Blackhawk Network

CLSA upgraded Blackhawk Network Holdings Inc HAWK to Outperform from Underperform and raised the price target by $2 to $36 on the recent pullback in shares, which fell about 7 percent in the last month.

"While we don't fundamentally view the business differently than we have in the past, we do want to separate the stock from the business and, as a result, view the risk/reward attractive at current levels," analyst Tom McCrohan wrote in a note.

"Our overall thesis on the fundamental business, such as operating leverage, EMV and earnings quality, remains unchanged, although some of these appear fixable," McCrohan continued.

The analyst believes the company's prepaid gift card business is resilient and wouldn't be impacted by digital as the consumer appetite for gift cards still going strong.

McCrohan also noted that issues of financial disclosures and earnings quality can be fixed. The analyst pointed out that the company has already reduced the number of revenue figures down to three from four and eliminated the add-back of tax benefits.

"While some of the load-value growth was a function of acquisitions, and the transition to EMV has resulted in some missteps this year, we view 2018 as better set up for possible low-double to mid-teen EPS growth," McCrohan added.