CheckFree Ascends on Upgrade

CheckFree CKFR stock rose Thursday after an analyst upgraded the online bill-payment company to 'buy', noting less downside risk to shares.

Shares of Norcross, Ga.-based CheckFree recently added $2.42, or 6.1%, to $42.18.

Citigroup's Tony Wible wrote that despite slowing electronic bill-payment adoption, CheckFree shares should benefit from better year-over-year comparisons and more adoption of so-called bill presentment, where the target customer is a business that offers a monthly service -- like a utility or cable company -- and wants to save on the costs of sending out paper bills.

"With postage going up 2 cents, many billers will cross the 40 cent threshold for postage, which may act as a catalyst for bill presentment adoption," Wible wrote.

In addition, he cited a moderate improvement in e-bill payment transaction growth rates and expanding margins as other reasons for the upgrade.

Wible lowered his target multiple to 21.5 times to 23 times, but said that it was more than offset by strong EPS growth implied by his $2.33-a-share calendar-year 2008 forecast. He raised his target price to $50 from $46.

In addition, Wible said that "there is less downside risk to CheckFree as consensus numbers have been reduced following the last two disappointing quarters. This pessimistic view is reflected in CheckFree's stock price which is down 16% year to date."