Heartland Payment Systems Inc.'s shares rose as much as 9% on Thursday after an analyst upgraded the payment processor's stock on the expectation that it will benefit from pending caps on debit interchange.
Thomas McCrohan, an analyst at Janney Montgomery Scott, raised his rating to "buy" from "neutral," citing in a research note his expectation that Heartland "will gain market share as a result of lower debit card interchange fees."
Heartland, of Princeton, N.J., which processes more than 2.5 billion credit and debit card transactions per year for U.S. merchants, has said it expects to be a beneficiary of the interchange limits because of how it prices its services.
Unlike some merchant processors that price their fees in a package — with interchange being one component — Heartland uses an "interchange plus" model that includes the direct cost of interchange plus an additional fee that Heartland keeps. If interchange decreases, the cost to a Heartland merchant would fall as well.
Heartland "is in a position to educate merchants on these savings and take share away from less honest providers," McCrohan wrote.
Heartland's shares closed up 8.1% on Thursday at $20.01.
