On Monday, Goldman Sachs reinstated coverage on NCR Voyix (NYSE: NYSE:VYX), issuing a Neutral rating with a price target set at $14.00.
The firm highlighted the mixed sentiment among investors in the payments sector, despite a generally stable consumer spending environment indicated by intra-quarter updates and macro data sources.
The analyst pointed out that while the average payments company witnessed a 9% rise in the third quarter, investor conversations reflected a varied outlook. Positive indicators included stable consumer spending trends and a normalization in travel and restaurant expenditures.
"However, based on our conversations with investors, risk appetite in the space is low, and investors are increasingly crowded in the perceived safe havens in the space," said the analysts, pointing to Visa (NYSE:V), MasterCard (MA), Fidelity National Information Services (FIS), and Fidelity National Information (FI) as examples.
Goldman Sachs noted that the lower-end consumer spending is trailing behind higher-end consumption, and discretionary spending is weaker compared to non-discretionary expenditures. These insights were shared alongside observations from the Goldman Sachs tech conference held in mid-September.
In other recent news, NCR Voyix has finalized the sale of its Digital Banking business to Veritas Capital, a transaction valued at $2.45 billion in cash, with an additional contingent consideration of up to $100 million. This strategic move is part of NCR Voyix's refocus on its primary restaurant and retail sectors. The divested Digital Banking business, now rebranded as Candescent, supports over 1,300 financial institutions and has more than 29 million registered users.
In addition to this significant sale, NCR Voyix reported a 5% increase in normalized software revenue for Q2 2024, despite a slight 2% decrease in services revenue. The company is also working on a broader strategy to reduce debt, a plan that includes a partnership with Ennoconn Corp for hardware solutions and a cost-saving program that cut 800 jobs.
Oppenheimer has maintained its Outperform rating for NCR Voyix following these recent developments. Furthermore, NCR Voyix aims to achieve a 20% EBITDA margin and 40% free cash flow conversion by 2025. The company has updated its 2024 outlook, projecting pro forma revenue of approximately $2.15 billion and pro forma adjusted EBITDA of approximately $430 million.
InvestingPro Insights
In light of Goldman Sachs' Neutral rating on NCR Voyix (NYSE: VYX), InvestingPro data provides additional context to the company's financial position. With a market capitalization of $1.94 billion, VYX has shown significant revenue growth of 108.31% over the last twelve months as of Q2 2024. However, this growth is tempered by recent headwinds, as evidenced by a 7.4% quarterly revenue decline in Q2 2024.
InvestingPro Tips highlight potential challenges for VYX. Analysts anticipate a sales decline in the current year, which aligns with Goldman Sachs' cautious stance. Additionally, VYX's stock price movements are noted to be quite volatile, which may contribute to the mixed investor sentiment in the payments sector mentioned in the report.
The company's financial health presents a mixed picture. While VYX has an operating income margin of 4.07%, InvestingPro Tips indicate that short-term obligations exceed liquid assets, and the company was not profitable over the last twelve months. This financial situation may explain why investors are gravitating towards safer options in the payments industry, as noted in the Goldman Sachs analysis.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for VYX, providing deeper insights into the company's financial outlook and market position.
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