First Data Upgraded By Goldman Sachs On 'Significant Upside Potential'

Despite choppy fundamentals at First Data Corp (NYSE:FDC), a Goldman Sachs analyst sees the likelihood of top-line improvement going forward. 

The Analyst

Analyst James Schneider upgraded shares of First Data from Neutral to Buy and increased the price target from $19 to $25, suggesting 25-percent upside.

The Thesis

Goldman recommends buyingn the First Data June 18 call option with a strike price of $20 at 40 cents ahead of the company's June 12 investor meeting, Schneider said in a Monday note, citing the sell-side firm's options strategists.

The analyst sees "significant upside potential" for the stock, which is trading at about a 40-percent discount to its peers.

"We think the case for upside is now more compelling and believe investors will start valuing FDC on P/E vs. EV/EBITDA as its leverage approaches peers," the analyst said. 

Schneider named three upcoming catalysts for the credit card processing company:

Organic growth acceleration in First Data's North American global business solutions thanks to easy comparisons for JV alliances and an improvement in growth at the SMB Direct business.

First Data's CardConnect and BluePay acquisitions are forecast to bolster client metrics by almost tripling exposure to ISV-sourced sales. The acquisitions will also help bolster U.S. GBS revenue growth by 100 basis points, according to Goldman Sachs.

The stock's multiple will rerate higher as the company delevers.

The Price Action

First Data shares have gained about 20 percent year-to-date.

First Data shares were rallying 2.22 percent to $20.50 at the time of publication Monday. 

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Photo courtesy of First Data.