Global Payments Inc.

GPN Details 

Global Payments Inc. (NYSE: GPN) is an international leader in payments technology and offers software and a variety of other solutions and services to small and medium-sized enterprises in over 100 countries across North America, Europe, Asia Pacific, and Latin America. Its revenue-generating segments include Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions. As of November 12, 2021, GPN's market capitalization stood at USD 38.20 billion.

Latest News:

• Collab with Rubean: On October 18, 2021, Global Payments Europe (GPE), a subsidiary of GPN, and Rubean AG, a developer of solutions for the financial sector, announced that Rubean's PhonePOS in Hungary added enterprise capabilities to its small merchant offering. PhonePOS allows merchants to accept contactless payments simply by downloading an application from Google Play on their Android smartphones.

Q3FY21 Results:

• Increase in Revenue: The company reported a 14.84% increase in revenue to USD 2.20 billion in Q3FY21 (ended September 30, 2021) from USD 1.92 billion in Q3FY20, primarily due to higher transaction volumes and increased use of digital payment solutions.
• Improvement in Net Income: Its Q3FY21 net income was USD 296.74 million, higher than USD 220.97 million reported in Q3FY20, representing diluted earnings per share (EPS) of USD 1.01.
• Balance Sheet Position: GPN exited the quarter with a cash balance of USD 2.35 billion and a total debt of USD 11.34 billion.
• Dividend Declaration: On November 02, 2021, it also announced a dividend of USD 0.25 per share, payable on December 30, 2021, to shareholders of record on December 16, 2021.

Key Risks:

• Chargeback Losses: When merchants refuse or cannot reimburse GPN for chargebacks resolved in its customers' favor, GPN suffers chargeback losses. As a result, any increase in chargebacks that the company's merchants do not pay could negatively impact its results of operations.
• Third-Party Dependence for Settlements: GPN employs several financial institutions to provide clearing services to aid settlement efforts. Hence, it may be unable to provide processing services to its clients if such financial institutions cease to offer clearing services, adversely affecting its financial stability.

Outlook:

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

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.

GPN Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

GPN's share price fell 33.83% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 127.91 to USD 220.81. The stock is currently trading far below its 50 and 200 DMA levels, and its RSI Index is at 31.81, indicating an oversold zone. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 170.64.

Considering the significant correction in stock price, strong profit margins, decent leverage, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 131.64, up 2.31% as of November 12, 2021.

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.