CheckFree Corp.'s stock has been surging since receiving an upgrade from Tony Wible, an analyst for Citigroup Inc.'s Smith Barney.
Since the upgrade, issued Friday, the Norcross, Ga., bill-payment technology vendor's stock has climbed 5.9%, to $36.44 a share as of midday Tuesday. It reached a 52-week high of $42.12 in March but had dropped to $34.40 by Friday.
Mr. Wible raised his rating for the stock to "buy-high risk," from "hold," and wrote in a research note that CheckFree's prospects may be better than its management has predicted.
"The recent share decline reflects an overly pessimistic scenario regarding" a soon-to-expire contract, Mr. Wible wrote. CheckFree's management will "lay out conservative guidance in the upcoming earnings call … but we are confident" it will beat that guidance.
A five-year contract with Microsoft Corp. and First Data Corp., which includes monthly minimum revenue guarantees, is set to expire next year, but CheckFree will be able to offset the lost revenue by cutting internal spending, he wrote. It inherited the contract in 2000, when it bought Transpoint LLC, a electronic bill-payment joint venture of Microsoft, First Data, and Citigroup Inc.
He also wrote that CheckFree will probably increase its revenue from Wells Fargo & Co. The San Francisco banking company has contracts with both CheckFree and Metavante Corp., but Mr. Wible wrote that Wells is sending more business to CheckFree.
He noted that the contract with Metavante, the technology subsidiary of Marshall & Ilsley Corp. of Milwaukee, requires Wells to route a certain minimum amount of its volume to Metavante, but only until the end of next year.
