Global Payments Inc.

GPN Details

Global Payments Inc. (NYSE: GPN) is a global payments technology company that serves small and medium-sized businesses in over 100 countries spanning North America, Europe, Asia Pacific, and Latin America with software and various other solutions and services. Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions are the company's revenue-generating segments.

Q3FY21 Results:

• Double-Digit Growth in Revenue: The company reported a 14.84% increase in revenue to USD 2.20 billion in Q3FY21 (ended September 30, 2021) compared to USD 1.92 billion in Q3FY20, attributable to higher transaction volumes and increased use of digital payment solutions.
• Improvement in Net Income: GPN’s Q3FY21 net income was USD 305.46 million, higher than USD 230.23 million reported in Q3FY20.
• Cash and Debt Position: As of September 30, 2021, the company had cash & cash equivalents of USD 2.35 billion and total debt of USD 11.34 billion.
• Dividend Declaration: On November 02, 2021, it also announced a dividend of USD 0.25 per share, paid on December 30, 2021, to shareholders of record on December 16, 2021.

Key Risks:

• Chargeback Losses: Chargeback losses occur when merchants refuse or cannot reimburse GPN for chargebacks that are resolved in their customers' favor. As a result, any increase in chargebacks that its merchants fail to pay could harm its operating results.
• Third-Party Dependence for Settlements: GPN works with various financial institutions to provide clearing services for its settlement activities. As a result, if these financial institutions stop offering clearing services, GPN may not provide processing services to its clients, jeopardizing its financial stability.

Outlook:

• Revenue Guidance: For FY21, GPN expects to generate sales in the range of USD 7.71 – 7.73 billion, representing a 14 – 15% YoY growth.
• EPS Guidance: It also stated that adjusted EPS for FY21 is expected to be in the range of USD 8.10–8.20, up 27–28% from FY20 results.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

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

Stock Recommendation:

GPN's stock price has increased 7.49% in the past three months and is currently leaning towards the lower-band of its 52-week range of USD 116.75 to USD 220.81. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 159.17.

Considering the slight movement in the stock price, increasing demand for digital payments, positive outlook, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 145.8603, down 3.29% as of February 03, 2022, 01:43 PM ET.

Three-Year Technical Price Chart (as on February 03, 2022, at 01:43 PM ET). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.