CheckFree Corp. shares spiked Tuesday after SunTrust Robinson Humphrey upgraded the Atlanta online bill payment service provider's stock to "buy," from "neutral," on optimism about future margins.
In morning trading CheckFree's stock rose 8.22%, to $54.09 a share by midday.
"We believe the risk/reward in the shares is steadily improving," Andrew W. Jeffrey, an analyst at the SunTrust Banks Inc. unit, wrote in a report published Tuesday. "CheckFree has successfully negotiated several corporate events which had the potential to adversely affect its growth trajectory. We assert that these risks are now materially in the past."
Two of CheckFree's contracts, which both carried minimum revenue guarantees, have expired since August. Also, Wachovia Corp. is almost finished converting its bill payment Web site to CheckFree, after experiencing some delays last year.
In January, CheckFree said that demand for its walk-in bill payment sites and its telephone bill payment service would increase.
Mr. Jeffrey wrote in his note, "CheckFree will support a higher long-term sustainable operating margin as it diversifies its business away from its largest financial institution customers."
