On Wednesday, Barclays initiated coverage on Shift4 Payments (NYSE: FOUR) stock with an Overweight rating and set a price target of $120. The firm suggests that Shift4 Payments is currently undervalued based on conservative estimates by other analysts and its low earnings multiples when compared to peers.
According to Barclays, the conservative outlook on Shift4 Payments may stem from the absence of company-issued financial guidance beyond the fourth quarter of 2024. The current medium-term guidance, which was provided in the third quarter of 2021, is set to expire this year.
The firm anticipates that a potential update from management, possibly in the third quarter of 2024, covering the period through fiscal years 2026 or 2027, could serve as a catalyst for higher estimates.
Barclays also pointed out that the market expectations for fiscal years 2025 and 2026 might not fully reflect Shift4 Payments’ international growth efforts, including its expansion via Starlink and its recent entry into the European market.
Furthermore, the firm compared Shift4 Payments’ enterprise value to EBITDA (EV/EBITDA) multiple for fiscal year 2026, which stands at 10x, to that of both incumbent and newer high-growth acquirers. This multiple is more aligned with incumbent acquirers like Fiserv (NYSE:) and Global Payments (NYSE:), which trade at multiples ranging from 8x to 11x, rather than high-growth companies such as Adyen (AS:) and Toast, which trade around 21x.
Barclays forecasts a compound annual growth rate (CAGR) of approximately 30% in revenue for Shift4 Payments through fiscal year 2027, alongside adjusted EBITDA margins expanding to over 50% by fiscal year 2025. Based on these expectations, the firm believes that Shift4 Payments’ stock should trade at a low double-digit EV/EBITDA multiple of around 12x.
In other recent news, Shift4 Payments has been making substantial strides in the financial sector. The payment processing company reported a robust second quarter, with revenue and adjusted EBITDA surpassing the company’s guidance.
The company’s net take rate also exceeded expectations, contributing to a positive outlook from BofA Securities. Shift4 Payments has completed the acquisitions of Revel and Vectron, and has announced the purchase of Givex Corp for approximately C$200 million, enhancing its service offerings.
Shift4 Payments has also formed partnerships with the Miami HEAT basketball team and Pacers Sports & Entertainment to manage ticketing transactions. The company intends to offer $1.1 billion in senior notes for general corporate purposes.
Analysts from firms such as Citi, William Blair, and RBC Capital have responded positively to these developments. Citi raised its price target to $93 and maintained a Buy rating, while William Blair initiated an Outperform rating. These are the recent developments surrounding Shift4 Payments.
InvestingPro Insights
Recent data from InvestingPro aligns with Barclays’ bullish outlook on Shift4 Payments (NYSE: FOUR). The company’s market capitalization stands at $8.15 billion, with a Price/Earnings ratio of 55.03, reflecting high growth expectations. Shift4’s revenue growth remains robust, with a 28.48% increase over the last twelve months as of Q2 2024, reaching $2.92 billion. This strong performance is further emphasized by an impressive 55.27% EBITDA growth over the same period.
InvestingPro Tips highlight that Shift4’s net income is expected to grow this year, supporting Barclays’ positive stance. The stock’s strong return of 73.8% over the past year and its trading near its 52-week high (99.33% of the high) suggest market confidence in the company’s prospects. These metrics reinforce Barclays’ view that Shift4 may be undervalued relative to its growth potential.
For investors seeking a deeper understanding of Shift4’s valuation and growth prospects, InvestingPro offers 12 additional tips, providing a comprehensive analysis to inform investment decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.