Financial services provider Fidelity National Information Services (NYSE:FIS) was downgraded to neutral from outperform by Baird on Wednesday. At the same time, the firm raised its price target for FIS to $78.00 from the previous $76.00.
The correction follows a period of notable performance for FIS shares, which were listed as one of the strongest year-to-date on Baird’s tracking list. The change in rating reflects a reassessment of the risk-return ratio of the company’s shares. Despite acknowledging FIS’ strong performance and ability to beat and improve financial guidance, the analyst cited several factors behind the downgrade.
Fidelity National Clearinghouse has been praised for its operational excellence under the leadership of Stephanie Ferris and Charles Drucker. Senior management was recognized for steering FIS and its subsidiary Worldpay in a positive direction, which was reflected in the company’s financial results.
However, the Baird analyst noted concerns including free cash flow (FCF) dynamics and the presence of some one-time spin-offs. These financial elements are seen as potential issues that could impact the company’s valuation and investor sentiment.
Additionally, the analyst expects strong earnings per share (EPS) growth for FIS. These expected growth rates, while positive, are viewed in the context of an economic environment where average interest rates are likely to increase, potentially impacting the financial sector and companies such as FIS.
The new price target of $78.00 suggests a moderately optimistic outlook, albeit with a more cautious stance than previously.
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