On Monday, Morgan Stanley adjusted its stance on Fidelity National Information Services (NYSE:FIS), downgrading the stock from Overweight to Equalweight and maintaining a price target of $79.00. The decision comes as the analyst believes the current share price, hovering around $77, is in close proximity to their target, suggesting limited room for growth.
The firm noted that the valuation of approximately 14 times earnings is a fair reflection of FIS's future earnings potential. Expectations of an uptick in the Banking segment's revenue growth to around 5%, improved from about 3% this year, and a stronger contribution from Worldpay are believed to be already factored into the stock's current price.
Morgan Stanley highlighted that several potential catalysts for Fidelity National Information Services have already occurred, including an Investor Day, the majority sale of Worldpay, and key management changes coupled with cost-saving measures. With these events in the rearview mirror, the firm sees few triggers left that could significantly revise earnings forecasts upward and drive notable expansion in the company's earnings multiple.
The price target of $79 is based on a 14 times multiple of earnings, which represents a 1 times discount to a faster-growing peer in the financial information sector that trades at a 15 times multiple. Morgan Stanley's estimates and price target for FIS remain unchanged despite the downgrade in rating.
In other recent news, Fidelity National Information Services (FIS) has been the subject of several analyst upgrades. RBC Capital Markets raised its price target for FIS to $93, citing confidence in the company's Capital Markets segment and the potential acceleration of the Banking segment.
The firm also noted a shift in FIS's focus from being a payments-focused entity to a high-recurring total return story. Similarly, TD Cowen increased its price target from $70 to $75, maintaining a Hold rating. Keefe, Bruyette & Woods (KBW) also revised its price target for FIS upwards to $85, based on improved tax rates and a stronger contribution from Worldpay.
FIS recently announced an expected annual growth of 9-12% in adjusted earnings per share (EPS) over the medium term, while also raising its full-year 2024 financial outlook. The company has set ambitious targets for adjusted revenue growth and EBITDA margin expansion for the years 2025 and 2026.
FIS has also increased its share repurchase target by $500 million to $4 billion for the year 2024, with plans for annual share repurchases between $0.8 billion and $1.2 billion in the following two years.
These recent developments highlight FIS's commitment to sustainable and profitable growth. The company's launch of the Atelio platform, an embedded finance platform, underscores its dedication to innovation in the financial technology sector. It's important to note that these are recent developments and the outlooks provided are subject to various risks and uncertainties.
InvestingPro Insights
InvestingPro data highlights that Fidelity National Information Services (NYSE:FIS) has a solid track record with a dividend that has been raised for 3 consecutive years and maintained for 22 consecutive years. This consistency may appeal to income-focused investors, particularly when considering that the company's liquid assets exceed its short-term obligations, indicating financial stability. Additionally, analysts expect FIS to be profitable this year, with net income predicted to grow, which aligns with the company's positive revenue growth of 14.69% over the last twelve months as of Q1 2024.
However, the company is trading at a high earnings multiple, with an adjusted P/E ratio of 102.64, which indicates a premium valuation relative to near-term earnings growth, and a PEG ratio of 1.57 suggesting that this growth may be priced in. Despite these considerations, the market cap of $41.86B and a dividend yield of 1.91% as of the latest data, reflect a company that is still garnering investor interest. For those looking for more insights, there are additional InvestingPro Tips available for Fidelity National Information Services, which can be accessed with the coupon code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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