Why Vantiv Inc. Shares Could Vault 20%

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 Vantiv  (NYSE: VNTV  ) gained slightly today after Wells Fargo upgraded the electronic payment processor from market perform to outperform.

So what: Along with the upgrade, analyst Timothy Willi raised his price target to $36-$38 (from $30-$32), representing as much as 22% worth of upside to yesterday's close. So while momentum traders might be turned off by Vantiv's year-to-date price sluggishness, Willi's call could reflect a sense on Wall Street that the company's growth prospects are becoming too cheap to pass up.

Now what: Wells boosted its 2014 earnings-per-share estimate for Vantiv from $1.82-$1.90 and its 2015 view from $2.02-$2.21. "On the heels of the announcement to acquire Mercury, we look for the shares to move higher as investors respond to: (1) the core franchise stabilizes and should see some acceleration in H2 2014; and (2) the Mercury transaction is accretive to EPS on a nominal basis and to long-term growth rates," said Willi. "The end result is that we believe sentiment on VNTV will shift as investors no longer focus on the deceleration of the last several quarters and begin to view VNTV as a company in which they have more confidence in above-average long-term growth rates." Given Vantiv's hefty debt load and steep-ish P/E of 35, however, I'd hold out for a wider margin of safety before betting on it. 

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