Raymond James Bullish On Fidelity National Following Worldpay Deal

Fidelity National Information Servcs Inc (NYSE: FIS) made a big splash earlier this year with its buyout of Worldpay Inc (NYSE: WP), but one analyst said Friday that Wall Street doesn’t fully appreciate the value the combined company can create.

The Analyst

Raymond James analyst John Davis resumed coverage of Fidelity National with a Strong Buy rating and $131 price target.

The Thesis

Davis said he likes the Fidelity National-Worldpay combination for three reasons:

• The deal will help facilitate Worldpay’s expansion into key emerging markets such as India and Brazil.
• Worldpay’s merchant base can leverage the NYCE debit network in the U.S.
• Fidelity National and Worldpay’s issuing businesses are complementary.

The deal improved both Fidelity National’s growth profile and its margins overnight, the analyst said. 

Fidelity National’s share price will likely be tied to the company’s free cash flow in the long-term, Davis said, adding that even after the huge deal, Fidelity National’s relatively strong balance sheet and impressive cash flow should allow for relatively quick deleveraging.

Davis said he wouldn’t be surprised to se a return to the M&A market or discussion of potential buybacks.

“Simply put, if management successfully integrates the WP business and delivers on its initial synergy expectations, we struggle to see what would keep the stock from significantly outperforming.” 

In the near-term, the analyst said execution of the merger and integration of Worldpay’s services will be the two biggest risks for Fidelity National investors.

Price Action

Fidelity National shares were trading up 0.41 percent at $38.75 at the time of publication Friday, while Worldpay shares were up 0.43 percent at $113.72. 

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