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On Tuesday, DA Davidson maintained a positive stance on Shift4 Payments (NYSE:FOUR), reiterating a Buy rating and a $124.00 price target. The endorsement aligns with the broader Wall Street sentiment, as InvestingPro data shows a strong analyst consensus recommendation of 1.59 (Buy). The company, currently valued at $7.67 billion, appears undervalued according to InvestingPro’s Fair Value model. The endorsement comes amidst rumors of a potential acquisition by Shift4. Peter Heckmann of DA Davidson addressed these rumors, which originated from a report by The Australian on Sunday, suggesting that Shift4 is considering the purchase of Smartpay, a New Zealand-based company offering point of sale (POS) solutions to over 40,000 merchants.
Heckmann sees the potential acquisition as a strategic move that aligns with Shift4’s history of mergers and acquisitions. The company has previously focused on expanding its customer acquisition funnel by acquiring providers that offer older POS solutions or specialized automation software. This strategy was evidenced by Shift4’s mid-2024 acquisition of Vectron, a German company. The approach appears to be working, with InvestingPro data showing impressive revenue growth of 29.86% and a notably low PEG ratio of 0.23, indicating attractive growth potential relative to valuation.
The analyst believes that if the acquisition of Smartpay proceeds, it would represent a relatively small deal for Shift4. Nonetheless, it would be a continuation of the company’s efforts to grow and enhance its market position through strategic acquisitions.
Shift4 Payments, headquartered in Allentown, Pennsylvania, specializes in providing integrated payment processing and technology solutions. The company’s platform is designed to cater to a variety of industries including hospitality, retail, and e-commerce.
The potential acquisition of Smartpay by Shift4 Payments has not been confirmed by either company, and details regarding the terms or the timeline of the deal remain speculative. Shift4 Payments has not publicly commented on the rumors or the report by The Australian.
Investors and market watchers will be keeping a close eye on Shift4 Payments as the situation develops, looking for any official announcements or confirmations regarding the rumored acquisition and its impact on the company’s growth strategy. For deeper insights into Shift4’s financial health and growth prospects, InvestingPro subscribers can access a comprehensive Pro Research Report, featuring detailed analysis of the company’s fundamentals, valuation metrics, and growth potential among 1,400+ top stocks.
In other recent news, Shift4 Payments has been the focus of several analyst updates following its announcement to acquire Global Blue for an enterprise value of $2.5 billion. RBC Capital Markets maintained an Outperform rating with a $154 price target, highlighting the acquisition’s potential to enhance the company’s growth in the retail sector and expand its international presence. DA Davidson, while lowering its price target to $124 from $140, reaffirmed a Buy rating, noting the acquisition’s potential risks but maintaining confidence in Shift4 Payments’ future prospects. Meanwhile, Keefe, Bruyette & Woods raised their price target to $125, citing strong growth drivers and the company’s strategic initiatives discussed during a recent Investor Day.
Shift4 Payments recently reported robust fourth-quarter earnings, although they fell slightly below some analysts’ projections. The company’s management expressed confidence in achieving high teens organic growth over the next three years, with potential acceleration from recent acquisitions like Global Blue. Global Blue itself has reported a 20% year-over-year revenue increase and a 31% jump in adjusted EBITDA for its fiscal third quarter. Analysts from RBC and DA Davidson project that Global Blue could significantly contribute to Shift4 Payments’ adjusted EBITDA in the coming years.
In other developments, ServiceNow (NYSE:NOW) and HubSpot (NYSE:HUBS) have been identified by RBCCM as stocks with buying potential due to their solid growth prospects. ServiceNow’s organic growth and free cash flow margins were noted as attractive, while HubSpot’s improved net retention rates and pricing model are seen as positive indicators. Carvana (NYSE:CVNA) also remains a top pick for RBCCM, with expectations of improved profitability and inventory ramp-up. These recent developments reflect a dynamic period for these companies as they navigate market conditions and strategic opportunities.
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