FleetCor Defended By Wells Fargo Against Citron Short Report: 'We Disagree With The Thesis'

Shares of FleetCor Technologies, Inc. FLT plunged 5.7 percent Tuesday. While shares responded to a negative report by Citron Research, “we disagree with the thesis and the facts supporting it,” Wells Fargo’s Timothy Willi said in a report.

The analyst reiterates an Outperform rating on the stock, while setting a valuation range of $170-$180.

Addressing Concerns Mentioned By Citron

The main thesis in Citron’s report indicated that FleetCor’s fee structure is predatory, since it’s based on the fact that the company generates 56 percent of its revenue from customers, rather than from merchants, while WEX Inc WEX has a fee structure that generates only 12 percent of total revenue from customers.

Related Link: Citron Goes Short On FleetCor

Willi mentioned the following to refute the thesis mentioned in Citron’s report:

• WEX generated at least 34 percent of its consolidated revenue in 2016 from customers. Moreover, within the Fleet segment, at least 39 percent of the company’s revenue that year was generated from customers. Although FleetCor’s 57 percent is a higher figure, it represents a “more comparable mix to WEX,” Willi noted.
• Referring to the fuel card businesses of both companies, the analyst stated that although FleetCor’s generated 44 percent more revenue-per-transaction than WEX in 2016, “we believe the premium is explained by business mix and not company-specific fee structures.”