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Wall Street Tears Up First Data, But Analysts Confident In 2016 Outlook

Wall Street Tears Up First Data, But Analysts Confident In 2016 Outlook

The Street smashed First Data Corp (NYSE: FDC) on Wednesday after the payment processor released disappointing fourth-quarter results. The company posted fourth-quarter revenues of $2.96 billion, short of analyst's $2.98 billion figure. However, earnings beat expectations at $0.32 over analysts' estimate of $0.26.

Additionally, the company posted a GAAP loss of $1.2 billion for the quarter, attributed to debt extinguishment and IPO costs. The company has $19.6 billion in gross outstanding debt.

Management did not issue guidance for fiscal year 2016 at this time.

'This Is Not 2008'

SunTrust analyst Andrew Jeffrey gave the company a Buy rating and $11.10 price target. Jeffrey cast side-eye at the market, titling his note "This Is Not 2008" and writing, "Sentiment swing massively overdone, in our view."

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Jeffrey was adamant that the company's stock didn't reflect its position, citing the fact that none of the company's debt matures until 2018 and significant EBITDA margin expansion as signs of the company's health. "These are not characteristics of a company in financial distress, in our view," he wrote. Jeffrey expects enterprise revenue to increase in 2016.

Oppenheimer analyst Glenn Greene, agreed, rating the company Outperform with a price target of $11.10. Greene wrote, "We do not read anything sinister regarding management's decision to not provide guidance," noting that "management suggests sustainable mid-single-digit growth and continued operating leverage."

Well, Now It's a Good Buy

BTIG researcher Mark Palmer upgraded First Data from Neutral to Buy with a $13 price point. Palmer thinks the market's reaction has attractively valued the company's stock. The falling price has muted some of his concerns, such as "modest revenue growth" and the company's high debt-equity ratio.

"Moreover, we believe the company will be able to de-lever over time given its strong cashflow generation even if choppy credit markets make additional balance sheet repair more challenging," Palmer concluded.

First Data shares were trending down about 10 percent from open Wednesday. Other payment processors and e-commerce firms were faring better, potentially off the analyst confidence despite competitors' poor performance.

Paypal Holdings Inc (NASDAQ: PYPL) was up about 3 percent, and Evertec Inc (NYSE: EVTC) was up about 5 percent at time of writing.

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