ACI Worldwide ACIW shares have gained 15% in the past three months, outperforming the Zacks Computer and Technology Sector and the S&P 500 index’s return of 2.2% and 4.8%, respectively. ACIW has also outperformed the Zacks Computer - Software industry’s decline of 1.7% in the same time frame.

ACIW’s significant outperformance indicates investors’ confidence in ACIW’s strong position in the electronic payments software market. Given the outperformance, should you buy or hold ACIW stock, or is it a risky bet? Let's find out.

ACIW Gains From Traction of Its Payments Solutions

ACI Worldwide has been able to constantly grow its revenues by promoting higher transaction volumes in the biller segment. During second-quarter 2024 earnings call, ACIW also reported that more deals are coming in its banking segment.

ACI Worldwide also stated that it is benefiting from its international expansion and especially capitalizing on the Asia-Pacific market, where its competitors are discontinuing their product support, creating greater opportunities for the company.

So far this year, ACIW has secured some major contracts for streamlining payments of various organizations. It has signed a contract with Nepal Clearing House, RYVYL EU, Kuvasz Solutions, Kiwibank, Arab Financial Services, AFFIN BANK, Mexipay and Red Hat internationally to modernize its payments solution and improve the instant payment infrastructure.

In the second quarter of 2024, ACIW’s biller segment revenues increased 13% year over year. The company also reported that its bank segment revenues grew 22% year over year.

ACI Worldwide 3 Month Performance

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ACIW Faces Competitive Headwinds

ACIW is facing intense competition in the electronic payments software space that might hurt ACI Worldwide’s growth prospects. Inside the United States, ACIW faces stiff competition from a range of players, including Fiserv, Inc., NCR Voyix Corporation VYX, Jack Henry & Associates, Inc. JKHY, Payoneer Global Inc., Nuvei Corporation and Paymentus Holdings, Inc. PAY.

In the merchant payments space, NCR Voyix competes with the ACI Payments Orchestration Platform. In the bill payments segment, ACIW competes with Jack Henry & Associates, Inc., Paymentus and Fiserv. However, several smaller players in these markets give tough competition to ACI Worldwide’s products.

The ongoing macroeconomic headwinds, including protracted inflationary conditions and still high interest rates, might also be a concern for ACIW as these challenges are forcing enterprises to delay or reconsider their deals. However, ACIW is circumventing these challenges on the back of its innovative product portfolio for now.

ACIW expects its 2024 revenues between $1.557 billion and $1.591 billion. The Zacks Consensus Estimate for revenues is pegged at $1.58 billion, indicating growth of 8.6% year over year.

What Should Investors Do?

ACI Worldwide’s steady flow of contracts reflects solid top-line growth potential. However, ACIW also faces stiff competition in the electronic payment software space that will keep its business prospects under pressure.

Additionally, the recent run-up in share price has driven ACI Worldwide's valuation to elevated levels. ACIW has a Zacks Value score of C, making it overvalued at present. A market correction or a period of consolidation could provide a better opportunity to invest in this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Paymentus Holdings, Inc. (PAY) : Free Stock Analysis Report

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