First Data's Investor Day: The Street's Takeaways

First Data Corp FDC hosted its investor day Tuesday morning, and the presentation was mostly cheered by Street analysts.

The Analysts

• Bernstein's Harshita Rawat maintained an Outperform rating on First Data with a price target lifted from $22 to $24.
• Morgan Stanley's James Faucette maintained an Equal-weight rating on First Data with a price target lifted from $19 to $20.
• Baird's David Koning maintained an Outperform rating on First Data with an unchanged $23 price target.

Bernstein: 4 Key Takeaways

First Data's investor day presentation "reinforced our bullish view" that ongoing turnaround initiatives are showing signs of success, Rawat said in a research report. The analyst's four main takeaways from the presentation were:

• First Data is "no longer a dinosaur" and is seeing success in reinvigorating its base merchant acquisition business.
• Management's revenue, EBITDA and free cash flow guidance are all likely conservative.
• First Data's capital allocation approach with a focus on debt reduction — then cash returns and acquisitions — is the right strategy.
• The company addressed an ongoing concern and said KKR will remain the largest shareholder for many years, and any exit plan is "quite measured."

Morgan Stanley: Faster Growth, Higher Comfort Level 

First Data's presentation made it clear 40 percent of total revenue will come from new products and services, Faucette said in a note. If the company's core business can also return to a sustainable growth trajectory, future earnings reports will likely come in ahead of expectations, the analyst said. 

First Data's commentary on debt reduction should leave investors with "more comfort" that incremental cash returns to investors will come in 2020 after First Data's leverage ratio falls below 4x, Faucette said. 

The upside case for First Data's stock above $20 per share could be attainable depending on the exact timing and magnitude of future share buyback activity, he said. 

Related Link: First Data Upgraded By Goldman Sachs On 'Significant Upside Potential'

Baird: Stock Will 'Keep Working'

Tuesday's presentation could mark a "catalyst," as First Data emphasized improving revenue growth, leverage and business mix, Koning said. The stock's valuation remains at a "pretty average" level,the analyst said, including a 23-percent discount to the S&P 500's NTM P/E. The stock could be worth $28 if the company shows a mid-single-digit revenue growth rate and leverage improves below 5x by the middle of 2019, according to Baird. 

Elsewhere On The Street

• Oppenheimer's Glenn Greene maintains an Outperform rating on First Data's stock with an unchanged $25 price target.
• Credit Suisse's Paul Condra maintains an Outperform rating on First Data's stock with a price target lifted from $23 to $25.

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