Barclays, in a recent report, adjusted its stance on several key players in Payments, Processors & IT Services. The bank upgraded Cognizant Technology Solutions (NASDAQ:CTSH) and Paychex (NASDAQ:PAYX) while downgrading Riskified (NYSE:RSKD) and Green Dot (NYSE:GDOT).
Analysts at Barclays believe that the payments industry is gradually emerging from a prolonged period of undervaluation. “And when the pandemic dust finally settles next year, we believe investors will see that the industry has changed a lot less than they were expecting,” commented the analysts.
Barclays upgraded Cognizant Technology Solutions to Equalweight from Underweight and raised its price target to $75 from $61. Barclays acknowledges the new management team's efforts to address past challenges like high attrition, imbalances in supply and demand, and a slowdown in bookings. “However, righting the ship is still a work-in-progress, and a combination of an improving macro-backdrop and consistent execution will be required in order for the company to re-establish itself as a vendor of choice in the space,” mentioned the analysts.
Barclays upgraded Paychex to Equalweight from Underweight, raising its price target to $126 from $107. The report pointed to an expected reacceleration in the Professional Employer Organization (PEO) segment in 2024. “With PAYX trading 2-turns below its 5-yr forward P/E average (i.e., 26x vs. the 5yr average of 28x), we believe a potential rise in unemployment is somewhat priced in, and therefore expect to see more stability in the stock over the next 12-months (though macro volatility and a tougher rate environment keep us on the sidelines for now),” noted the analysts.
Barclays downgraded Riskified to Equalweight from Overweight, with a price target of $5. The rating change reflects concerns over the company’s lowered fiscal 2023 revenue guidance and the lengthening sales and revenue conversion cycles. “We also see inconsistent eCommerce trends and a volatile macro backdrop leading to spend shift toward more non-discretionary categories,” commented the analysts.
Barclays downgraded Green Dot to Underweight from Equalweight and cut its price target to $7 from $8, noting it awaits further clarity regarding the company's strategic path and its business model's evolution. “Over the past couple quarters, it has become increasingly clear that the investment and time required to move the company away from its legacy model and toward a more crystallized digital strategy is more substantial than we originally anticipated,” commented Barclays.