Shares of Global Payments Inc. GPN have plunged 16.4% in the past year, underperforming the industry’s growth of 20.5%. Peers like Fiserv, Inc. FI and Fidelity National Information Services, Inc. FIS have gained 51.6% and 27.1%, respectively, over the same time frame. The S&P 500 index has rallied 24.8% in the past year, a stark divergence from GPN’s price performance.

The stock moved down 21.4% at this point from its 52-week high of $141.78. The stock is currently trading below its 50-day moving average, signaling downward momentum.

Global Payments’ 1-Year Price Performance Comparison

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Given this performance so far, can investors still consider holding on to Global Payments stock or should they steer clear? Let us delve deeper.

What’s Weighing on GPN Stock?

Global Payments faces challenges from rising operating expenses, which inched up 1.5% year over year in the first nine months of 2024. Intensified competition in the payment market from emerging firms threatens profitability and pricing dynamics.

Elevated competition in the payment market poses a notable concern for the company. Accelerated growth of emerging payment firms is rapidly securing market share, pressuring pricing dynamics. This intensified competition can impact Global Payments' profitability as it navigates challenges in maintaining competitive pricing within the market.

The company is currently trading at 8.68X forward 12-month earnings, below its five-year median of 12.65X and the industry average of 24.54X. This suggests that the stock is undervalued, indicating cautious investor sentiment or market concerns about its near-term performance.

Global Payments’ Earnings Estimates Move Down

Reflecting the negative sentiment around Global Payments, the Zacks Consensus Estimate for earnings per share has seen downward revisions. The consensus estimate for 2024 adjusted earnings for GPN is pegged at $11.58 per share, indicating 11.1% year-over-year growth.

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However, if a company’s fundamentals are strong enough, it can weather these headwinds. Let us take a look at GPN’s growth drivers.

GPN’s Business Tailwinds

Strong contributions from the Merchant Solutions and Issuer Solutions segments have been key revenue growth drivers for Global Payments. These segments reported year-over-year revenue increases of 8.8% and 3.9%, respectively, in the first nine months of 2024. Both units continue to benefit from increased transaction volumes.

The company is aiming for adjusted net revenue growth, excluding dispositions, in the mid-single-digit percentage range for 2025. It anticipates revenue growth of mid to high-single digits during 2026-2027. GPN aims to achieve international expansion and a renewed focus on the SMB market.

Global Payments continues to expand its capabilities and market presence through acquisitions, partnerships and joint ventures. Acquisitions remain a strategic priority for management to enhance business scale and access new markets. Partnerships with CaixaBank and Virgin Money were aimed at bolstering digital payment services.

GPN has invested significantly in technology, focusing on product innovation and transitioning its technology platforms to cloud environments. These efforts aim to improve platform performance, diversify its portfolio of cloud-based solutions and achieve cost efficiencies. Global Payments is simplifying its POS portfolio from more than 16 brands to a single cohesive platform aiming to boost competitiveness and operational efficiency. To streamline its focus on core operations, the company has divested non-core assets and expects an annual revenue impact of $500-600 million starting in the second half of 2024.

Conclusion

Global Payments is navigating near-term challenges like rising expenses and competitive pressures, which have weighed on its stock performance. However, its focus on streamlining operations, divesting non-core assets and enhancing technology capabilities positions it for growth. Current shareholders should stay put and benefit from its expanding operations and strategic initiatives. However, new investors should wait for a better entry point.

Global Payments currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report

Global Payments Inc. (GPN) : Free Stock Analysis Report

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