Goldman Sachs Upgrades Fidelity National Information Services To Buy

While shares of Fidelity National Information Services FIS are trading near trough valuation, the company is poised for revenue growth acceleration in 2016. Goldman Sachs’ James Schneider upgraded the rating for the company from Neutral to Buy, while raising the price target from $68 to $76.

Factors Driving Buy Rating

Analyst James Schneider mentioned three reasons for the positive rating:

1. Revenue growth is expected to reaccelerate in 2016, following lackluster trends in 2015. Schneider expects steady IFS trends to outpace dampened market expectations. Growth in the GFS segment is likely to recover as the company benefits from increased merchant bank exposure. Moreover, the Capco consulting business is expected to return to robust growth in the back half of 2016.
2. Margins are likely to begin to expand, backed by mix shifts away from lower-margin international revenue toward higher-margin software revenue. Margins would also benefit from Fidelity National’s execution of substantial restructuring activities following the SunGard deal.
3. The stock’s valuation discount relative to peer Fiserv Inc FISV appears unwarranted, and is likely to narrow as the company shows signs of improved topline growth and margin trends in 2016.

“Finally, we expect the stock’s multiple to expand if FIS delivers upside to 2016 guidance, which we see as easily achievable,” the analyst commented.