On Monday, Barclays (LON:BARC) reaffirmed its Overweight rating on shares of Global Payments (NYSE:GPN) with a price target of $120.00.
The endorsement comes amidst investor concerns regarding the projected 2025 slowdown in the Merchant Solutions segment of the company. Contrary to the prevailing investor sentiment that market share loss is the primary factor behind the forecasted deceleration, Barclays suggests that the reasons are less worrisome.
Barclays indicated that the unexpected guidance for the deceleration in Global Payments' Merchant revenue growth rate in fiscal year 2025 (F25) had led to investor apprehension. "However, in our opinion, management seems to be taking a bit more calculated approach as they look to re-position and re-accelerate growth over the medium term," said the analysts.
The financial institution elaborated on the composition of the expected growth in the Merchant Solutions segment. According to the guidance for F25, the segment is anticipated to experience mid-single-digit (MSD) adjusted net revenue growth. This projection is based on the expected performance of sub-segments including Point of Sale (POS) & Software and Integrated & Embedded solutions, which are predicted to grow at a mid-single-digit-plus (MSD+) rate, and Core Payments, which is projected to grow at a low-single-digit (LSD) rate.
Barclays further clarified the recent performance of these sub-segments, noting that over the last twelve months, POS & Software grew by 10%, Integrated & Embedded by 8%, and Core Payments by 5%, collectively contributing to high-single-digit (HSD) growth. This detail provides a clearer picture of the company's current trajectory and the basis for future projections.
In other recent news, Global Payments has seen strategic realignment and operational transformation plans, aiming to return $7.5 billion to shareholders over the next three years while forecasting revenue and earnings per share growth through 2027.
Following these developments, RBC Capital cut its stock target for Global Payments to $143, maintaining an Outperform rating. Mizuho Securities also trimmed its price target to $100 while keeping a Neutral rating, reflecting a tepid outlook for 2025.
KeyBanc reduced its price target to $135 but remained optimistic for fiscal years 2026 and 2027, retaining an Overweight rating. Seaport Global Securities downgraded the stock from Buy to Neutral due to concerns about the company's growth projections. Despite these adjustments, several firms including Monness Crespi Hardt, B.Riley, and BMO Capital Markets have revised their price targets for Global Payments, all retaining their respective ratings.
InvestingPro Insights
Global Payments' financial metrics and market performance offer additional context to Barclays' optimistic outlook. According to InvestingPro data, the company's P/E ratio stands at 17.87, with an adjusted P/E of 14.95 for the last twelve months as of Q2 2024. This relatively low valuation, coupled with a PEG ratio of 0.22, suggests that the stock may be undervalued relative to its growth potential.
InvestingPro Tips highlight that Global Payments is expected to grow its net income this year and is trading at a low P/E ratio relative to its near-term earnings growth. This aligns with Barclays' positive stance on the company's strategic repositioning for future growth. Additionally, Global Payments has maintained dividend payments for 24 consecutive years, demonstrating financial stability and commitment to shareholder returns.
The company's revenue growth of 6.63% over the last twelve months and a robust gross profit margin of 62.84% further support the potential for continued financial performance. With a market capitalization of $25.1 billion and analysts predicting profitability this year, Global Payments appears well-positioned to navigate the challenges and opportunities ahead.
For investors seeking a deeper understanding of Global Payments' prospects, InvestingPro offers 15 additional tips, providing a comprehensive analysis to inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.