On Thursday, KeyBanc Capital Markets adjusted its outlook on shares of Global Payments (NYSE:GPN), reducing the stock price target to $145 from $155 while maintaining an Overweight rating. The adjustment follows the company's first-quarter 2024 earnings report, which revealed revenue in line with analyst expectations and slightly better-than-anticipated adjusted operating margin and earnings per share.
Global Payments' Merchant Solutions segment reported a steady year-over-year organic growth of 8%, consistent with the previous quarter, despite the impact of a leap day and the timing of Easter in the first quarter of 2024. Management's commentary for April indicated stability in trends, aligning with peers in the sector.
The firm's full-year 2024 guidance remains unchanged, even with an anticipated foreign exchange headwind of approximately $20 million in the second quarter of 2024. However, the company's outlook on the pace and timing of margin expansion for the remainder of the year was seen as a slight letdown.
Investor attention is expected to turn to Global Payments' investor day scheduled for fall 2024, where a more detailed discussion on growth drivers, especially in Merchant Solutions, and a broader strategy for margin improvement is anticipated.
In response to the earnings report and management's guidance, KeyBanc has revised its revenue estimates for fiscal years 2024 and 2025, primarily due to the Merchant Solutions segment, and has incorporated more conservative margin expansion projections.
The revised stock price target of $145 is based on an 11.3 times multiple of the company's forecasted fiscal year 2024 enterprise value to EBITDA, taking into account the updated estimates. KeyBanc reiterated its Overweight rating, expressing a positive view on Global Payments' combination of software and technology-led solutions, growth potential, beneficial mix factors, a proactive approach to mergers and acquisitions, and its relative market valuation.
InvestingPro Insights
Global Payments (NYSE:GPN) has maintained a consistent track record of dividend payments, rewarding shareholders for 24 consecutive years, which underscores the company's financial stability and commitment to returning value.
According to the latest data from InvestingPro, the company's market capitalization stands at $27.82 billion, and while the P/E Ratio is currently not applicable, the adjusted P/E ratio for the last twelve months as of Q1 2024 is 19.41. This valuation metric may appeal to investors looking for reasonably priced growth opportunities, especially considering the PEG ratio of 0.02 which suggests that the stock's price is potentially undervalued relative to its earnings growth.
Despite recent price declines, with a 1-week total return of -12.49% and a 1-month total return of -15.04%, the company's fundamentals reveal a gross profit margin of 62.36% and a revenue growth of 7.36% over the last twelve months. Analysts remain optimistic, predicting profitability for the year, which could potentially signal a buying opportunity for long-term investors, especially given the InvestingPro Tip that the RSI suggests the stock is in oversold territory.
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