What used to be a "lazy long" sector exposure, known for its continuous compounding, has become a wild west of volatility, with narratives flying from all directions in a manner befitting a saloon shootout. Among the names in the space which have taken the most damage are the legacy merchant acquirers / issuers processors.
To put it in perspective, Global Payments (GPN) is trading at 13.7x NTM P/E, significantly down from its 21.8x 5-year average; moreover, relative to the S&P500 on a forward P/E basis, GPN is trading at a record low -26% discount vs. a historically average +26% premium. Meanwhile, Fiserv (FISV) is trading at 15.7x NTM P/E, also down from a 5-year average of 21.8x; relative to the market, the stock has reached its financial crisis record low discount of -27% as compared to a historical premium of +17%.
Are these business models truly set for extinction? What competitors are driving this extinction? How much market share have the likes of FISV and GPN really lost so far? What exactly does the battlefield look like? These are among the many questions we will be addressing in our call next week as we look to make sense of the narrative heavy payments space whose defenses against a seemingly bipolar market are weakened by growth still dampened by the lingering effects of the pandemic.
Our view is that the sell-off in both names is grossly overdone and that both companies have durable growth trajectories which make for sound investments despite the incumbent-disruptor paranoia of the current market.
Key Points of Discussion
- A look at the current merchant acquiring domain and its various sub-domains (online x enterprise/SMB, in-person x enterprise/SMB)
- Business model overview + a review of medium-term strategies and growth outlooks
- Fiserv: global distribution x scale x SMB POS dominance in Clover - is it enough to stay relevant?
- Global: is there enough exposure to software and e-commerce to fend off disruption from SaaS payment disruptors?
- BNPL and credit card spending - is the payments pie big enough and growing fast enough for both?
- Quad performance review / macro tailwinds
CALL DETAILS:
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Friday, November 19th @ 12:30 PM ET - Add to Outlook Calendar Participating Dialing Instructions:
CLICK HERE to access the video and materials link |
