Global Payments Fundamental Analysis.
Resume of Global Payments Fundamental Analysis. Global Payments, headquartered in Atlanta, GA, is a significant player in the payment technology services sector. Established in 2000 as Global Payments Inc. in Georgia and spun off from its parent company in 2001, the company has roots in the industry dating back to 1967, including its time under its former parent. Following its separation, Global Payments has broadened its international presence and market share through acquisitions and joint ventures.
Operational Structure.
The company’s operations are structured into three primary segments. First, Merchant Solutions, accounting for 68.8% of its adjusted revenues in 2022, focuses on delivering payment technology and software solutions globally. This segment helps customers process various payment forms, including card, check, and digital payments, and offers software solutions that streamline operations across several vertical markets. Additionally, Merchant Solutions provides an array of value-added services, such as specialized point-of-sale solutions, analytics, customer engagement tools, and payroll services, all aimed at enhancing customer business efficiency.
The second segment, Issuer Solutions, contributes 23.7% of the company’s revenues. It offers services that assist financial institutions and other financial service providers in managing card portfolios on a unified platform. This segment aims to reduce technical complexity and overhead while ensuring a seamless cardholder experience.
Lastly, the Consumer Solutions segment, making up 7.5% of Global Payments’ revenues, focuses on providing financial services to underbanked and other consumer groups in the United States. This includes offering general-purpose reloadable prepaid debit and payroll cards, demand deposit accounts, and related financial services under the Netspend brand, among others. Notably, the company completed the divestiture of Netspend’s consumer assets at the end of April.
In summary, Global Payments has evolved into a diversified provider of payment technology and financial services, with a broad international footprint and a focus on efficient, integrated solutions across its Merchant, Issuer, and Consumer segments.
PER VS PEERS.
SHARE PRICE VS FAIR VALUE.
PRICE TARGET.
FUTURE GROWTH FORECAST.
REASONS TO BUY.
Strong outlook.
Global Payments projects a positive outlook for 2023, expecting significant growth across key financial metrics. The company forecasts adjusted net revenues to reach between $8,660 million and $8,735 million, marking a 7-8% increase from its 2022 figures. Adjusted earnings per share (EPS) are projected to be in the range of $10.39 to $10.45, reflecting an 11-12% rise from the previous year. Additionally, Global Payments anticipates a 120 basis point expansion in its adjusted operating margin compared to 2022.
Company’s strategic acquisitions.
The company’s growth strategy heavily relies on strategic acquisitions. These acquisitions have consistently strengthened its technology platform, with notable purchases including APT, PayPros, Heartland, and Total System Services. The acquisitions of Zego and Mineral Tree have expanded Global Payments’ presence across various markets. The Zego acquisition alone exposed the company to a trillion-dollar market. Furthermore, the company has recently finalized the acquisition of EVO Payments, a leading payment technology and services provider, expected to add approximately $475 million to Global Payments’ adjusted net revenues in 2023.
Strategic partnership.
Global Payments also emphasizes top-tier strategic partnerships to advance its business and technology. A noteworthy multi-year partnership with Alphabet is set to significantly enhance the company’s cloud-based product offerings, improve operational efficiencies, and expedite its technology-enabled distribution strategy. Additionally, an agreement with Amazon Web Services will provide a cloud-based issuer processing platform for financial institutions globally. Collaborations with Mastercard, CaixaBank, Erste Bank und Sparkassen, Virgin Money, PwC, and 10x Banking further illustrate Global Payments’ commitment to strengthening its payment solutions.
Financial health.
Financially, Global Payments is in a robust position. With a strong investment-grade balance sheet and stable free cash flow generation, the company has significant capital and financial flexibility. As of September-end, its cash and cash equivalents stood at $1.9 billion, exceeding its short-term debt obligations. The company’s operating cash flows have been on an upward trajectory, and it aims to generate $15 billion in adjusted free cash flow cumulatively from 2021 to 2025. With $2.3 billion already generated in 2022, Global Payments is on track to convert around 100% of its adjusted earnings to adjusted free cash flow. In the first nine months of 2023 alone, it generated $1.6 billion in operating cash flows. This strong financial standing enables continued investment in the business and strategic capital deployment. Only in 2022, the company returned over $3 billion to shareholders through share repurchases and dividends.