The payments sector finds another sell-side fan for 2017, with Pacific Crest's Josh Beck recommending going overweight the whole sector, with the exception of American Express (AXP +2.2%) and PayPal (PYPL -0.1%).
Top ideas: Square (SQ +2.5%) and Total System Services (TSS +0.1%).
Square's "semi-specialized" small and medium business software opportunity is "underappreciated," he says, thanks to it being such a fragmented market.
"Regulatory clarity" should allow Total System Services to close a valuation gap with peers.
He's also a fan of Visa (V -0.5%) and MasterCard (MA -0.1%), though debit routing and VocaLink could be distractions in the short term. He's bullish on Vantiv (VNTV -0.2%) thanks to share gains and a stronger hand in shaping industry consolidation, and sees room for deleveraging at First Data (FDC +0.2%).
While a fan of PayPal and AmEx, Beck doesn't see a path the significant EPS upside at either company.
In other AmEx sell-side news, Oppenheimer upgrades to Outperform, with a Street-high PT of $98 suggesting 27% upside.
Fifth Third (NASDAQ:FITB) is exercising its remaining warrant to receive 5.65M Class C units of Vantiv Holding (NYSE:VNTV), and it will the exchange those on a one-for-one basis into Class A common stock. Finally Fifth Third will sell 4.8M shares of VNTV in a secondary offering, and Vantiv will repurchase 850K shares.
After the above, Fifth Third's voting power will be trimmed to 17.9% from 18.3%.
Vantiv (NYSE:VNTV) announces that it acquired Moneris Solutions from Moneris Solutions Corporation for $425M in a deal slated to close in Q4.
The company says it will begin servicing Moneris USA's merchants and other business relationships, including its relationship with BMO Harris Bank, which operates approximately 600 branches in the United States.
Moneris USA processed ~$12B in U.S. transaction volume last year.
"Acquiring Moneris USA will further accelerate Vantiv's growth in key high-growth channels," says Vantiv CEO Charles Drucker.
Vantiv expects to fund the transaction with cash-on-hand and be accretive to net income in 2017.
Vantiv (NYSE:VNTV) yesterday launched a secondary offering of 13.4M shares of stock owned by Fifth Third Bancorp (NASDAQ:FITB), as the bank continues to wind down its stake.
In Q4, Fifth Third expects to book a gain of about $273M after-tax from this sale (and a number of transactions just ahead of it). After all of these deals, the bank will be an owner of about 18.3% of Vantiv.