Why Total System Services, Inc. Might Pop in 2014

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Total System Services, Inc.  (NYSE: TSS  ) gained slightly this morning after Nomura Securities upgraded the payment processor from neutral to buy.

So what: Along with the upgrade, analyst Tulu Yunus raised his price target to $38 (from $29), representing about 20% worth of upside to yesterday's close. While contrarians might be turned off by Total System's strong rally in 2013, Yunus believes there's plenty of room to run given his view of continued top-line growth, and margin expansion in the payments segment.

Now what: Nomura raised its 2014 EPS estimate for Total System by $0.01 to $1.73, and from $2.14 to $2.05 for 2015. Nomura said, "The company as a whole is at a point where it will see accelerating revenue and EPS growth as it turns the page on price pressure and lost business headwinds, enjoys margin expansion, and repurchases shares (sooner than expected)." Of course, with the stock up 50% from its 52-week lows, and trading at a P/E of 25, I'd wait until a little more risk is factored into the valuation. 

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