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First Data Corp (NYSE:FDC) — This mid-cap information technology company is a global leader in electronic commerce, offering an array of integrated products including next-generation commerce technologies with well-situated point-of-sale channels.
On May 11, Standard & Poor’s raised its 12-month target to $19, up $1, noting that its price-to-earnings ratio, at 12.4X, is lower than its peers at 21X due to First Data’s high but improving debt load. They also raised their 2017 earnings per share estimate to $1.53, an increase of 4 cents and up from $1.32 in 2016. They expect a further increase in EPS to $1.63 in 2018.
FDC reported Q1 earnings of 28 cents, which was in line with estimates, up 17% on lower interest. Revenues increased 1% ($16M above consensus). With strong cash flow and no debt maturities until 2020, S&P forecasts further deleveraging this year. Thus, they have retained a “Four-Star Buy” on FDC stock.
In late August 2016, FDC stock completed a consolidation that began with a golden cross (long-term buy signal), which led to a well-defined bull channel. Price support has fluctuated around its 50-day moving average, now at $15.73. A continuation gap opened early this month at $16 to $16.40, and remains open.
That gap was partially closed at mid-month, but since a near-term CBR Sell signal occurred three days ago, it is probable that the gap will shortly close. That could present an excellent opportunity to buy FDC at $16 with a trading target of $19 for a proposed gain of over 18%.
A stop-loss at $14.75, under the stock’s 200-day moving average, is suggested.
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