Broadridge Financial Solutions, Inc. BR could return to the organic recurring revenue growth rate of 5-7 percent targeted by the company on the back of a reacceleration in revenue growth in its Global Technology & Operations — GTO — segment over the next few quarters, according to Raymond James.
The Analyst
Raymond James’ Patrick O'Shaughnessy upgraded Broadridge from Market Perform to Outperform and set a $118 price target.
The Thesis
The shareholder communications services company, founded as a spin-off from Automatic Data Processing ADP, has been witnessing meaningful pressure on its revenue growth, O'Shaughnessy said in the Wednesday upgrade note.
The analyst said he expects revenue growth to decline from the 9 percent achieved in fiscal 2018 to 4 percent in fiscal 2019.
Broadridge’s solid closed-sales activity and growing backlog of larger deals should convert into revenue going ahead, boosting growth back to 7 percent in fiscal 2020, in Raymond James' view.
The company has indicated that a large global post-trade processing contract with a major bank could begin in the fourth quarter, O'Shaughnessy said. Broadridge has also won several contracts from Asian and European banks in post-trade processing, corporate actions and other newer solutions, he said.
“We believe Broadridge’s current valuation offers investors an attractive entry point into a differentiated, high barrier-to-entry business."
Price Action
Broadridge Financial shares were up 3.61 percent at $104.07 at the time of publication Wednesday.
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