Evercore ISI sets Global Payments stock at In Line, $85 target

On Tuesday, Evercore ISI began coverage on shares of Global Payments (NYSE:GPN) with an In Line rating and established a price target of $85.00. The firm's analysis acknowledges the challenging nature of the company's simultaneous transformation of its major segments. The analyst noted the difficulty of re-platforming technology and rebranding while under the continuous scrutiny of public markets. The stock, currently trading near its 52-week low at $79.47, has experienced a significant decline of 26% year-to-date. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value calculations.

Global Payments has been undertaking a significant overhaul of its issuing technology and merchant team organization. This process is expected to position the company for higher growth in the coming years. According to Evercore ISI, the company is projected to experience modest growth and strong cash generation throughout 2024 and 2025. These efforts are seen as a setup for potential high single-digit growth rates in 2026 and 2027, assuming the absence of severe macroeconomic disruptions. The company maintains strong fundamentals with a healthy gross profit margin of 63% and generated $2.86 billion in levered free cash flow over the last twelve months.

The analyst also pointed out that if growth were to decelerate to low-single digits, investors might shift their focus to higher growth narratives, especially during market rebounds. However, such a shift would be contingent on the company's performance relative to current valuations.

In the interim, Global Payments is expected to leverage its free cash flow (FCF) to repurchase its own stock. This strategy is aimed at enhancing future optionality for the company. The coverage initiation reflects a view that Global Payments is in a transitional phase, with potential for growth acceleration in the near future.

In other recent news, Global Payments Inc. reported a slight miss on its fourth-quarter earnings and revenue estimates, with a 1% shortfall in revenue and a 0.3% miss in earnings per share. The company's outlook for 2025 also fell short of expectations, with a projected 2% miss in revenue and a 1% miss in EPS. In response to these results, Mizuho (NYSE:MFG) Securities adjusted its price target for Global Payments to $100, maintaining a Neutral rating, while Citi analysts lowered their price target to $135, continuing to recommend a Buy rating. Bernstein analysts reiterated a Market Perform rating with a $120 price target, noting the company's complex situation amidst various strategic moves.

Additionally, Global Payments announced an accelerated share repurchase program, aiming to buy back $250 million of its common stock, a move intended to return value to shareholders. The company also faces challenges with foreign exchange headwinds impacting its growth projections. Meanwhile, Global Payments' Chief Human Resources Officer, Andréa Carter, has resigned to pursue another opportunity, with no successor announced yet. The company remains focused on its transformation initiatives, including the rollout of the Genius POS system and service harmonization efforts.

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