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On Monday, Wolfe Research updated its outlook on Fidelity National Information Services (NYSE:FIS), raising the price target to $100 from the previous $93. The firm has maintained its Outperform rating for the stock. The adjustment in the price target reflects Wolfe Research's expectation of the company's growth and margin expansion, along with its strategy for capital deployment.
The new price target is based on a 14 times estimated 2026 EBITDA multiple, which is slightly above the average for companies of similar weight in the S&P 500 index. This valuation also translates to 16 times the estimated 2026 earnings per share (EPS) or 18 times excluding Worldpay EMI. Wolfe Research's analysis indicates a strong outlook for Fidelity National Information Services, particularly in the second half of 2024, which they expect to align with their projections.
The analyst's commentary underscores the potential for high-recurring revenue and lower beta stocks to experience significant price-to-earnings (P/E) multiple expansion correlated with each point of revenue growth. According to Wolfe Research, for companies like Fidelity National Information Services, each point of revenue growth could lead to an increase of up to four P/E multiple points over time.
Fidelity National Information Services is being recognized for its solid financial performance and strategic initiatives that could drive further growth and profitability. The company's focus on margin expansion and growth acceleration, coupled with effective capital deployment, are key factors in Wolfe Research's positive outlook.
In other recent news, Fidelity National Information Services has made several strategic moves. The company appointed Robert Toohey as the new Corporate Executive Vice President and Chief People Officer, effective from January 1, 2025. This follows the recent announcement of several analyst upgrades and downgrades. TD Cowen raised its price target on FIS shares to $78, maintaining a Hold rating, while BofA Securities increased its target to $90, maintaining a Buy rating. However, Morgan Stanley downgraded FIS from Overweight to Equalweight, citing limited room for growth.
Fidelity National Information Services has also raised its full-year 2024 financial outlook and set ambitious targets for adjusted revenue growth and EBITDA margin expansion for the years 2025 and 2026. The company increased its share repurchase target by $500 million to $4 billion for the year 2024. These recent developments reflect strong sales momentum in its Banking segment and robust performance in its Capital Markets segment.
In addition, Fidelity was involved in the launch of the first U.S. exchange-traded funds (ETFs) tied to ether, marking a significant milestone in the integration of digital assets into the broader financial sector.
InvestingPro Insights
Fidelity National Information Services' recent performance aligns well with Wolfe Research's optimistic outlook. According to InvestingPro data, FIS has demonstrated strong financial health and market performance. The company's revenue for the last twelve months as of Q2 2024 stood at $9.96 billion, with a modest growth of 2.01%. This growth trajectory supports Wolfe Research's expectation of the company's expansion.
InvestingPro Tips highlight that FIS has maintained dividend payments for 22 consecutive years, showcasing its financial stability and commitment to shareholder returns. This aligns with the analyst's positive view on the company's capital deployment strategy. Additionally, the tip indicating that net income is expected to grow this year further reinforces the analyst's projection of margin expansion.
The company's market performance has been particularly impressive, with a one-year price total return of 71.31% as of the latest data. This substantial growth reflects investor confidence in FIS's strategic direction and potential for future success.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for FIS, providing a deeper understanding of the company's financial position and market outlook.
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