Global Payments Inc. (NYSE: NYSE:GPN) received a rating downgrade from William Blair, moving from Outperform to Market Perform.
The firm cited concerns over the company's ability to accelerate long-term organic revenue growth within its merchant business.
According to the firm, Global Payments is facing structural competitive challenges that may hinder its growth. The company's management has indicated that 2025 will be a transition year, expecting below-industry mid-single-digit merchant organic revenue growth. However, the firm expressed skepticism about the company's capacity for revenue growth reacceleration post-2025.
The firm also pointed to a significant estimated price-to-earnings (P/E) discount for Global Payments compared to its competitor, Fiserv (NYSE:FI), which is not expected to change. The current estimated 2025 P/E discount for Global Payments is over 50% relative to Fiserv, which maintains an Outperform rating and a stock price of $177.35.
Furthermore, the firm mentioned that the possibility of an issuer sale, which was previously considered a positive catalyst for Global Payments, now seems unlikely. This revelation came during the company's analyst day, which took place the day before the downgrade was announced.
In other recent news, Global Payments has been the subject of several analyst adjustments following its Investor Analyst Day. TD Cowen reduced the company's stock target to $122 but maintained a Buy rating. Despite growth projections for fiscal year 2025 falling below market expectations, the firm remains optimistic about the company's long-term potential.
RBC Capital also maintained an Outperform rating for Global Payments, even though the company's growth projections for 2025 trailed their estimates. The company has outlined strategies to achieve around $500 million in operational savings and has committed to returning $7.5 billion to shareholders through stock buybacks and dividends.
However, BTIG downgraded Global Payments from Buy to Neutral, citing concerns over the company's potential to expedite growth in the coming years. On the other hand, Goldman Sachs reaffirmed its Buy rating, expressing confidence in the stock based on Global Payments' continued strong performance in revenue and earnings per share growth.
Citi adjusted its outlook for Global Payments, reducing the price target to $142 while maintaining a Buy rating. The firm anticipates a potential divestiture opportunity for the company towards the end of 2024 or early 2025.
InvestingPro Insights
Following the recent rating downgrade for Global Payments Inc. (NYSE:GPN), investors may be seeking additional metrics to gauge the company's financial health and future prospects. According to InvestingPro data, Global Payments has a market capitalization of $26.42 billion and is trading at a P/E ratio of 19.04, which adjusts to a more favorable 15.73 when considering the last twelve months as of Q2 2024. This suggests that the company is trading at a low P/E ratio relative to near-term earnings growth, an observation supported by one of the InvestingPro Tips indicating potential for net income growth this year.
The company's revenue growth has also been steady, with a 6.63% increase over the last twelve months as of Q2 2024. Additionally, Global Payments has demonstrated a strong gross profit margin of 62.84%, reflecting efficient operations and cost management. Despite the skepticism expressed by William Blair regarding the company's revenue growth reacceleration post-2025, these figures provide a more nuanced picture of the company's financial status.
InvestingPro Tips further highlight that Global Payments has maintained dividend payments for 24 consecutive years, offering a dividend yield of 0.96% as of the last recorded date, and analysts predict the company will be profitable this year. With a total of 5 additional InvestingPro Tips listed, interested investors can delve deeper into the company's performance and expert forecasts at https://www.investing.com/pro/GPN.
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