Global Payments (NYSE: GPN) underperformed over the past year, as its stock price fell nearly 30%.
Shareholders shouldn’t be concerned about their holdings, as the decline could have been caused by tax-loss reaping or higher uncertainties stemming from the Omicron variant. Competitors also performed disappointingly.
The fundamentals of the company, on the other hand, are considered strong. In fact, some analysts, including Goldman Sachs, think Global Payments and other payment processing stocks, including credit card stocks, will participate in benchmark index provider S&P's proposal to rebalance the S&P 500 in favor of a financial sector revaluation.
Thus, I am bullish on this stock.
Global Payments is a leading provider of innovative payment technology solutions and services that help global customers run their businesses efficiently.
Q3 2021 Results
Turning to the third quarter of 2021, Global Payments outperformed analysts on adjusted earnings by $0.03 per share and total revenues by $210 million.
Adjusted earnings were $2.18 per share, while total revenues were $2.2 billion, up nearly 15% year-over-year.
Shareholders witnessed the strongest performance ever, despite the pandemic headwinds from COVID-19.
Guidance
For full-year 2021, the company expects adjusted net revenues between $7.71 billion and $7.73 billion (up 14.22% to 14.52% from 2020), versus a consensus of $7.73 billion.
The company also released its adjusted earnings estimates. These are expected to be between $8.10 per share and $8.20 per share (up 26.56% to 28.13% from 2020), versus a consensus of $8.15.
Robust Outlook
As a leader in the payment technologies industry, the company is positioned to capitalize on the expected increase in the value of total transactions completed through digital payments.
These should increase at a compound annual growth rate of nearly 11% over the five-year period to 2025, when, according to Statista, the total amount of digital payment transactions is expected to be close to $10.75 trillion. In 2020, it was $5.43 trillion.
The following key metrics bolster the business outlook for Global Payments:
1. Digital commerce accounts for more than 60% of the total value of digital payment transactions. The growth of e-commerce favors transactions carried out via digital payment methods.
2. The growth of e-commerce is also a driving factor in China, where the market has the world's highest cumulative transaction value (it is over 40% of the total). As an indication: the share of cross-border e-commerce out of total foreign trade has increased tenfold in the past five years thanks to the strong commitment of the Chinese government to that effect.
Through its local government, it promotes the creation of ecosystems in which consumers and entrepreneurs must resort to digital payments to regulate commercial transactions.
Furthermore, in the United States, Global Payments is part of a group of other companies that will work with the Mastercard (NYSE: MA) Buy Now, Pay Later option, enabling the company to offer interest-free flexible installment payments to consumers.
Wall Street’s Take
In the past three months, 21 Wall Street analysts have issued a 12-month price target for GPN. The company has a Strong Buy consensus rating, based on 17 Buys, four Holds and zero Sell ratings.
The average Global Payments (GPN) price target is $186.42, implying 22.5% upside potential.
Conclusion
Given its market leadership and robust outlook, this stock is on track for a strong recovery.
One of the most important and influential providers of ratings globally thinks the same. The stock grants a forward dividend of $1 per share, yielding 0.6% as of this writing.
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Disclosure: At the time of publication, Alberto Abaterusso did not have a position in any of the securities mentioned in this article.
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