On Monday, Raymond (NS:RYMD) James analyst actions resulted in a downgrade for Fidelity National Information Services (NASDAQ:III) (NYSE:FIS) stock, moving from a Strong Buy to an Outperform rating. Accompanying the rating change, the price target was also reduced to $101.00 from the previous $115.00. The $43.2 billion market cap company, which boasts a perfect Piotroski Score of 9 according to InvestingPro data, has shown strong financial health metrics despite the downgrade.
The decision to lower the stock's rating comes after FIS exhibited a noteworthy performance in the past year, with the stock climbing 34% compared to the S&P 500 equal-weighted index's increase of 11%. This rise was further bolstered by an expansion in the company's enterprise value to EBITDA ratio by approximately 20%. The analyst acknowledged FIS's solid execution but indicated that the absence of immediate growth drivers and the recent significant revaluation warranted a more conservative outlook.
Despite the downgrade, Raymond James continues to see a favorable risk/reward scenario for FIS going into 2025. However, the firm anticipates investor skepticism regarding the company's organic Banking growth acceleration, especially due to a one-time boost in revenue from Worldpay commercial services in the previous year.
The analyst predicts that while FIS management is expected to drive growth, it may take several quarters for investor confidence to solidify in the company's growth outlook. Recent InvestingPro data shows management's commitment through aggressive share buybacks, with net income expected to grow this year.
The report further notes that FIS shares are currently trading at roughly 10 to 13 times the estimated 2026 EBITDA/EPS. Raymond James suggests that although the stock is likely to continue its upward trajectory, the firm is opting to "take some chips off the table" after a robust performance in 2024.
According to InvestingPro's Fair Value analysis, FIS currently appears slightly undervalued, with comprehensive valuation insights available in the Pro Research Report, part of the platform's coverage of over 1,400 US stocks.
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