Global Payments Inc.

GPN Details

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

Latest News:

• Recent Collaboration: On May 2, 2022, GPN and BKKT, a trustworthy digital asset platform that allows customers to purchase, trade, send and spend various digital assets, established a strategic collaboration. Global Payments and Bakkt will collaborate on multiple use cases, including enabling cryptocurrency redemption in bankcard clients' customer loyalty programmes, 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. Furthermore, Bakkt will work closely with Global Payments to accept international merchant payments.

Q1FY22 Results:

• Growth in Topline: The company reported a YoY growth of 8.35% in overall revenue to USD 2.16 billion in Q1FY22 (ended December 31, 2021) from USD 1.99 billion in Q1FY21, driven by 16.18% growth in Merchant Solutions.
• Reduction in Profitability: In Q1FY22, GPN' net income increased by 24.43% to USD 244.73 million from USD 196.68 million in Q1FY21.
• Cash and Debt Position: The company had USD 181.79 million in cash and cash equivalents as of March 31, 2022, and total debt of USD 1.59 billion.

Key Risk:

• 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 from unpaid merchants could harm the company's bottom line.
• Third-Party Dependence for Settlements: 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 from unpaid merchants could harm the company's bottom line.

Outlook:

FY22 Guidance (in billion, except per share data) (Source: Q1FY22, Earnings Presentation, February 03, 2022)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (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:

GPN' stock price has fallen 19.20% in the past nine months and is currently leaning towards the lower end of its 52-week range of USD 116.75 to USD 210.12. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 148.90.

Considering the correction in the stock price, strong margins, positive outlook, associated risks, and current valuation. We recommend a "Hold" rating on the stock at the closing price of USD 133.68, up 4.38% as of May 04, 2022.

Three-Year Technical Price Chart (May 04, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

Note 2: All forecasted figures and industry information have been taken from REFINITIV.  

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