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Investing.com - Bernstein SocGen Group has reiterated its Market Perform rating on Global Payments (NYSE:GPN) with a price target of $95.00, following reports that activist investor Elliott has taken a sizable stake in the company. Currently trading at $80.22, the payment processor appears undervalued according to InvestingPro analysis, with a P/E ratio of 12.9x and market capitalization of $19.5 billion.
The Financial Times reported that Elliott has acquired a significant position in Global Payments, prompting Bernstein analyst Harshita Rawat to assess what actions the activist investor might pursue. Bernstein believes the recently announced Worldpay-Issuer Solutions deal is unlikely to be blocked as it doesn’t require shareholder approval and has terms that appear to be "iron clad." InvestingPro data shows the company maintains strong fundamentals with a 62.9% gross profit margin and healthy cash flows, making it an attractive target for activist involvement.
Elliott may push for board seats to add credibility to management’s plans to return $7 billion to shareholders from 2025-2027, addressing investor skepticism about the company’s commitment to shareholder returns given its history of acquisitions. The activist could also potentially advocate for management changes to enhance execution credibility. According to InvestingPro, management has already been aggressively buying back shares, and the company has maintained dividend payments for 25 consecutive years, demonstrating a track record of shareholder returns.
Bernstein suggests Elliott might focus on extracting greater cost synergies from the Worldpay deal, improving execution on the Genius platform, implementing broader operational transformation, and establishing more achievable targets with better earnings quality.
The activist involvement could ultimately lend credence to actions already committed to by Global Payments management and help transition the company from an M&A-led growth model to a more mature, stable business, according to Bernstein’s analysis.
In other recent news, Global Payments has been in the spotlight due to several key developments. The company recently announced the sale of its payroll business to Acrisure for $1.1 billion, a move aimed at streamlining operations and focusing on core activities. This divestiture aligns with Global Payments’ strategy to return capital to shareholders and is expected to slightly increase earnings per share in fiscal year 2026. Additionally, the company has introduced a new point-of-sale system called Genius for Retail, designed to support small and medium-sized retail businesses with advanced payment capabilities and business management tools.
In the realm of analyst ratings, B.Riley reiterated a Buy rating with a $194 price target, highlighting Global Payments’ low valuation and consistent earnings growth. Meanwhile, Keefe, Bruyette & Woods and BMO Capital Markets both maintained a Market Perform rating, with price targets of $81 and $86, respectively. BMO Capital noted the sale of the payroll business as a strategic move that provides financial flexibility ahead of the Worldpay acquisition. The acquisition of Worldpay, valued at $24.2 billion, has been a significant focus for Global Payments as it seeks to expand its payment processing capabilities. The involvement of activist investor Elliott Management, which has built a significant stake in the company, has also drawn attention, with expectations that it could influence future strategic directions.
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