Global Payment Inc.

Global Payments Inc. (NYSE: GPN) is a software and service provider that specializes in payments technology. Merchant Solutions, Issuer Solutions and Business, and Consumer Solutions are the company's segments.

GPN Details

Latest News

• Josh J. Whipple, presently Senior Executive Vice President and Chief Strategy and Enterprise Risk Officer at Global Payments Inc., has been named the company's new Chief Financial Officer, starting July 1, 2022. Paul M. Todd, the company's current Senior Executive Vice President and Chief Financial Officer, will leave the company at the end of June.
• On May 2, 2022, Bakkt Holdings, Inc., and Global Payments (NYSE: GPN) announced a strategic agreement. Global Payments and Bakkt will collaborate on a variety of use cases, including enabling cryptocurrency redemption in bankcard clients' customer loyalty programs, expanding its banking-as-a-service offerings to include cryptocurrency access for consumers, and eventually leveraging issuing technologies to link virtual, debit, credit, and prepaid solutions.
• Global Payments Inc. on May 02, 2022, declared its first quarter of 2022, financial results and reaffirms its outlook of 2022.

Key Takeaways from Q1 FY22 financial results

• GAAP revenues were USD2.16 billion, up from USD1.99 billion the year before, while diluted profits per share were USD0.87, up from USD0.66 the year before.
• Adjusted net revenues climbed 8% to USD1.95 billion in the first quarter of 2021, compared to USD1.81 billion the previous quarter.
• Adjusted profits per share grew 14 percent to USD2.07, up from USD1.82 in the first quarter of 2021, while adjusted operating margin improved 50 basis points to 41.1 percent.
• The Board of Directors of Global Payments has approved a USD0.25 per share dividend, which will be paid on June 24, 2022, to shareholders of record on June 10, 2022.
• For the quarter ended March 31, 2022, cash and cash equivalents and long-term loans were USD 2.045 billion and USD 11.02 billion, respectively.

Outlook

• The company expects adjusted net revenue to be in the range of USD8.42 billion to USD8.50 billion in 2022, up 9 percent to 10% (10 percent to 11 percent on a constant currency basis) from 2021, and adjusted earnings per share to be in the range of USD9.45 to USD9.67, up 16 percent to 19 percent (17 percent to 20 percent on a constant currency basis) from 2021.
• The business now expects annual adjusted operating margins to improve by up to 125 basis points (up to 175 basis points excluding acquisitions) in 2022, up from a previous forecast of up to 100 basis points (up to 150 basis points excluding acquisitions).

Key Risk

• Macroeconomic risk: Economic weakness or recession, significantly rising interest rates, fiscal or political uncertainty, market volatility, declining employment levels, declining demand for commercial real estate, falling real estate values, disruption to global capital or credit markets, or public perception that any of these events may occur can all have a negative impact on the performance of some or all the company's service lines.
• FX risk: In 2022, the firm forecasts adjusted net sales to increase by 9% -10% (excluding FX effect -10% -11%) and adjusted profits per share to increase by 16% -19% (excluding FX effect -17% -20%), demonstrating the importance of FX risk in the company's profitability.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

Source: REFINTIV, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation

Over the past nine months, GPN's share price has corrected by 30.82%. The stock is currently leaning towards the lower end of its 52-week range of USD 109.33 to USD 196.88. The current price is below both short-term (50-day) SMA and long-term (200-day) SMA with an RSI of 34.65. We have valued the stock using the EV/EBITDA multiple-based relative valuation method and arrived at a target price of USD 140.09. We believe that the company is trading at a discount from its peer's average considering but with strong fundamentals, and a good cash position, gives bullish estimates for the upcoming near future.

Considering the strong fundamentals, robust top-line results, associated risks, positive outlook, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 112.07, up 1.74% as of June 14, 2022, as of 09:10 AM PDT.

One Year Technical Chart, as of June 14, 2022, at 09:10 AM PDT. Data Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

*Entry Price as of June 14, 2022 at 09:10 AM PDT

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.