Blackhawk Network Holdings Inc. (NASDAQ: HAWK) has recently completed its acquisition of Achievers Corp., a provider of employee recognition services. Based on the new estimates and expectations, Argus reiterated its Buy rating and raised its price target to $48 from $4 in the call.

The independent research firm expects the acquisition to be neutral against earnings in 2015. More importantly, it expects that the deal will be accretive in 2016. Another positive driver was that this acquisition was on the heels of a strong first quarter and that the deal increases its full-year outlook.

Argus gave its 2015 earnings per shares (EPS) estimate as $2.19, which is within management’s guidance range of $2.13 to $2.23, and up 24% from 2014. Tax benefits are expected to add about $0.70 to full-year EPS. The firm raised its 2016 EPS forecast to $2.47 from $2.44 and even called Blackhawk the remaining clear leader in a market with strong secular growth prospects that has opportunities to diversify geographically and to expand beyond closed-loop gift cards.

Argus said:

We believe that Blackhawk remains the clear leader in a market with strong secular growth prospects. We also like the company’s moves to diversify geographically and expand beyond closed-loop gift cards, and see its recent acquisition of Achievers Corp. as a fundamental positive. Blackhawk is gaining traction in the high-growth open-loop card market as well as in its new incentives business. Although Blackhawk shares have risen strongly year-to-date, we believe that they remain attractively valued.

Lastly, Argus noted that Blackhawk’s stock trades at a discount to peers, despite it having stronger near-term growth opportunities than peers.

Blackhawk paid for the acquisition using only cash on hand. Back in 2014, Achievers generated revenue of $50 million and has grown revenue at a 30% compound annual rate over the past two years.

Achievers is a strategic acquisition for Blackhawk in that it complements and strengthens the company’s existing employee incentives business and it should help to gain scale in a fragmented market.

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The Achievers’ platform enables anywhere/anytime use on any device from desktop to mobile, provides real-time data analytics on program success and adoption, and can be easily deployed and upgraded. The SaaS nature of the Achievers business is based on a recurring revenue model with three-year contract terms. Its customer retention rate is 91%.

Blackhawk shares were up 0.6% at $41.66 late on Monday against a 52-week range of $26.14 to $42.39. The stock has a consensus analyst target price of only $40.95, and the highest analyst price target is $50.

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