GPN Plunges 16.4% in a Year: Should You Buy, Hold or Sell the Stock?

Stock Performance - Shares of Global Payments Inc (GPN) have plunged 16.4% in the past year, underperforming the industry's growth of 20.5% [1] - 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 [1] - The S&P 500 index has rallied 24.8% in the past year, a stark divergence from GPN's price performance [1] - The stock moved down 21.4% from its 52-week high of $141.78 and is currently trading below its 50-day moving average, signaling downward momentum [2] Challenges - Global Payments faces challenges from rising operating expenses, which inched up 1.5% year over year in the first nine months of 2024 [4] - Intensified competition in the payment market from emerging firms threatens profitability and pricing dynamics [4][5] - The Zacks Consensus Estimate for earnings per share has seen downward revisions, with the 2024 adjusted earnings estimate pegged at $11.58 per share, indicating 11.1% year-over-year growth [7] Valuation - 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, suggesting the stock is undervalued [6] Growth Drivers - Strong contributions from the Merchant Solutions and Issuer Solutions segments have been key revenue growth drivers, with year-over-year revenue increases of 8.8% and 3.9%, respectively, in the first nine months of 2024 [9] - The company aims for adjusted net revenue growth, excluding dispositions, in the mid-single-digit percentage range for 2025 and mid to high-single digits during 2026-2027 [10] - Global Payments continues to expand its capabilities and market presence through acquisitions, partnerships, and joint ventures, with strategic priorities including enhancing business scale and accessing new markets [11] Strategic Initiatives - Significant investments in technology focus on product innovation and transitioning technology platforms to cloud environments, aiming to improve platform performance and achieve cost efficiencies [12] - The company is simplifying its POS portfolio from more than 16 brands to a single cohesive platform to boost competitiveness and operational efficiency [12] - Divestment of non-core assets is expected to have an annual revenue impact of $500-600 million starting in the second half of 2024 [12] Conclusion - Global Payments is navigating near-term challenges like rising expenses and competitive pressures, but its focus on streamlining operations, divesting non-core assets, and enhancing technology capabilities positions it for growth [13] - Current shareholders should stay put and benefit from its expanding operations and strategic initiatives, while new investors should wait for a better entry point [13]