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On Wednesday, Fidelity National Information Services (NYSE:FIS), a financial services technology provider, saw its stock rating downgraded by Baird from Outperform to Neutral. At the same time, the firm raised its price target for FIS to $78.00, from $76.00 previously.
The adjustment follows a period of notable performance for FIS stock, which was highlighted as one of the strongest year-to-date on Baird’s tracklist. The rating change reflects a reassessment of the risk/reward ratio for the company’s stock. While he acknowledged FIS’s solid execution and ability to exceed and elevate financial forecasts, the analyst cited several factors for the downgrade.
Fidelity National Information Services was praised for its operational performance under the leadership of Stephanie Ferris and Charles Drucker. The executive team is credited with leading FIS and its subsidiary Worldpay in a positive direction, which has been reflected in the company’s financial results.
However, the Baird analyst highlighted concerns including free cash flow (FCF) dynamics and the presence of some non-recurring add-backs. These financial elements are seen as potential challenges that could impact the company’s valuation and investor sentiment.
Additionally, the analyst expects a high-single-digit earnings per share (EPS) growth cadence for FIS. This expected growth rate, while positive, is considered in the context of an economic environment where the average interest rate is likely to increase, potentially impacting the financial sector and companies like FIS.
The new price target of $78.00 suggests a moderately optimistic outlook, albeit with a more cautious stance than previously maintained.
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