By Michael Elkins
Barclays reinstated coverage of Global Payments Inc (NYSE:GPN) with an Overweight rating and $125.00 price target on the stock following the close of the company’s acquisition of EVO Payments.
Barclays initially suspended their rating, estimates, and PT for GPN on August 1, 2022, owing to Barclays Bank PLC and/or its affiliate serving as financial advisor to Global Payments in relation to its announced definitive agreement under which it acquired EVO Payments. The acquisition officially closed on Friday March 24, 2023.
Analysts view GPN’s current valuation/share price as “dislocated,” given GPN’s healthy growth/earnings profile. “We see shares as particularly attractive at current levels,” they wrote.
“We believe the guidance management provided on the 4Q22 earnings call is achievable and ahead of peers in the space. The full year guidance includes: 1) adjusted revenue growth in the range of 6-7%; 2) Merchant Solutions revenue growth of 15-16%; 3) Issuer Solutions (including B2B) revenue growth of 4.5%-5.5%; 4) adj. operating margin expansion of up to 120 bps; and 5) adj. EPS growth of 10%-11%. Similarly, we believe the company’s Issuer Solutions business is primarily made up of large financial institutions and lacks any exposure to the regional bank stress seen in recent weeks,” they added
Barclays noted in their coverage that GPN has methodically expanded its competitive moat with innovation on both its integrated and digital commerce channels, as well as adding new geographies, a move that management hopes will capture the ongoing secular shift of cash and check to digital payments. Barclays also acknowledges the negative price action over recent months, which they attribute to investor concern regarding GPN’s SMB exposure in the context of potential macro deterioration. However, on macro, the analysts believe the company actually processes more non-discretionary volumes than investors appreciate.
Shares of GPN are down 0.01% near end-of-day trading on Thursday.