Why the EML Payments (ASX:EML) share price is bouncing 16% higher

The EML Payments Ltd (ASX:EML) share price is bouncing back on Thursday following a day to forget on Wednesday. Here's why…

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The EML Payments Ltd (ASX: EML) share price is bouncing back after a day to forget on Wednesday.

The payments company's shares were up as much as 16% to $3.24 at one stage today. They have now eased back a touch but remain 7% higher at $3.00 currently.

Why is the EML Payments share price jumping?

There appear to be a couple of catalysts for the strong rise in the EML Payments share price on Thursday.

One is bargain hunters swooping in on the belief that its shares were oversold on Wednesday when they lost 45% of their value.

That decline occurred after EML Payments revealed that its Irish business, which oversees its Prepaid Financial Services European operations, could have its licence revoked by the Central Bank of Ireland. This is in relation to Anti-Money Laundering/Counter Terrorism Financing compliance concerns.

Given that this business accounted for 27% of total revenue during the third quarter, the loss of its licence would be a major blow. However, given how far its shares fell, some investors may believe the selling was overdone.

Macquarie retains outperform rating

Also giving the EML Payments share price a boost today was news that analysts at Macquarie Group Ltd (ASX: MQG) have retained their outperform rating on its shares.

The broker has, however, slashed its price target materially to $4.00. This is largely to reflect the removal of the Irish business from its valuation. However, Macquarie is optimistic that regulatory action won't be as drastic as that.

Based on the current EML Payments share price, this price target implies potential upside of 50% for its shares over the next 12 months.

While this is still well short of its recent high of $5.89, it certainly is an attractive potential return for anyone that wasn't already holding shares.

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. The Motley Fool Australia has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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