Domo signs strategic collaboration agreement with AWS for AI solutions
On Thursday, DA Davidson adjusted its outlook on Shift4 Payments (NYSE: FOUR), increasing the price target to $126 from $118, while reaffirming a Buy rating on the stock. The revision follows Shift4's third-quarter earnings report, which showcased a 50% year-over-year growth in net revenue, with 27%-28% of that growth being organic. Additionally, the company reported a 51% year-over-year increase in adjusted EBITDA.
The company's management also made slight revisions to their 2024 financial guidance. In response to the quarterly update and the adjusted company forecasts, DA Davidson has revised its own projections. The firm has increased its annual adjusted EBITDA forecasts by 1%-2% for the years 2024 through 2026.
The analyst from DA Davidson noted the positive performance of Shift4 Payments, highlighting the substantial growth in key financial metrics. According to the analyst's statement, "Shift4 reported 3Q results with 50% Y/Y growth in net revenue (27%-28% organic) and 51% Y/Y growth in adjusted EBITDA. With results, management made modest changes to their 2024 financial guidance ranges."
Following the third-quarter update, DA Davidson has fine-tuned its forecasts for Shift4 Payments. The firm's decision to maintain a Buy rating reflects its continued confidence in the company's performance and future prospects.
The new price target of $126 is based on an enterprise value that is 12 times DA Davidson's 2026 adjusted EBITDA forecast for Shift4 Payments. This target adjustment represents the firm's belief in the company's sustained growth and profitability going forward.
In other recent news, Shift4 Payments has been the subject of several analyst reviews following its third-quarter financial performance. Piper Sandler increased its stock price target from $93.00 to $120.00, maintaining an Overweight rating due to the company's higher than expected EBITDA margin. Similarly, RBC Capital Markets raised its price target from $94.00 to $116.00, citing significant growth in the company's payment volume backlog.
Shift4 Payments' third-quarter results revealed a 51% EBITDA margin, or 54% when excluding acquisitions, despite gross revenue less network fees (GRLNF) and end-to-end (E2E) volume falling short of market expectations. The company also reported a record-breaking EBITDA of $187.4 million and an adjusted free cash flow of $111 million, marking a 46% increase year-over-year.
The company's payment volume backlog grew to $33 billion in the third quarter of 2024, reflecting the conversion of $5 billion during the quarter and an addition of $13 billion in new business. RBC Capital Markets noted the significant number of new agreements secured by Shift4 Payments, indicating potential for meaningful growth in the fiscal year 2025.
In terms of strategic expansion, Shift4 Payments launched operations in four new African countries and plans further expansion into LATAM and Australia/New Zealand by 2025. However, the company anticipates falling short of its goal to reach 10,000 international restaurants and hotels by 2024.
InvestingPro Insights
Shift4 Payments' recent performance aligns with the positive outlook presented by DA Davidson. According to InvestingPro data, the company's revenue growth remains strong, with a 31.37% increase over the last twelve months as of Q3 2024, and an even more impressive 34.62% growth in the most recent quarter. This robust growth supports DA Davidson's bullish stance on the stock.
The company's EBITDA growth of 50.36% over the last twelve months mirrors the 51% year-over-year increase highlighted in the article, further validating the analyst's positive assessment. Additionally, Shift4's price performance has been remarkable, with a 59.89% total return over the past year and a 55.95% return over the last six months, indicating strong investor confidence.
InvestingPro Tips suggest that Shift4 Payments has a high earnings quality, with free cash flow exceeding net income. This factor could contribute to the company's ability to sustain its growth trajectory. Another tip notes that analysts have recently revised their earnings estimates upwards, aligning with DA Davidson's increased EBITDA forecasts.
For readers interested in a deeper analysis, InvestingPro offers 13 additional tips for Shift4 Payments, providing a comprehensive view of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.