Global Payments Inc. GPN is set to grow in the long run on the back of increased global consumption and an uptrend in electronic payments as well as integrated payments.
The company’s intensified focus on strengthening its software-driven payments makes it stand out in the industry. Ongoing investments in technology led to the transition in the company’s business mix toward technology enablement, which is expected to represent 60% of its revenues (up from 30% in 2015) and fuel significant growth by the end of 2020 with a balanced portfolio across owned SaS, partnered software, and e-commerce and omnichannel assets.
The acquisitions of APT in 2012, PayPros in 2014 and Heartland in 2016 also expanded the company’s technology platform. Its open software arm was further extended by the buyouts of AdvancedMD and SICOM. Global Payments’ robust technology solutions will continue to set its class apart in the marketplace and position it well for consistent progress.
Despite the impact of COVID-19 on payment volumes, the company’s technology-enabled portfolio remained a bright spot. In particular, the company witnessed strength in its e-commerce and omni-channel solutions globally, delivering 16% growth during the second quarter excluding Travel & Entertainment as it acted quickly to assist customers in shifting gears to online platform.
Another major long-term growth catalyst for the company is its takeover of Total System Services, one of the largest providers of card issuer solutions to financial institutions. The deal gave it ample exposure to the fast-emerging markets globally with physical and virtual presence in more than 100 countries. The highly complementary nature of these leading payments-focused businesses provides significant revenue enhancement opportunities. The company expects to realize $350 million of expense synergies over the next three years (2020-2023). It also anticipates reaping of at least $125 million of annual run rate revenue benefits over the same period.
Recently, the company collaborated with AWS and extended the expansion of its joint venture with CaixaBank. These collaborations, further strengthen its competitive edge for years to come. With AWS as the company’s preferred cloud provider for Issuer services, the company will deliver innovative payment solutions at scale globally in a secured cloud-based environment, enabling best-in-class experiences for its Issuer clients and their cardholders. This transformative alliance will also substantially enrich the company’s pool of revenue opportunities.
The association with AWS broadens Global Payments’ geographic reach with the worldwide footprint of the company reaching nearly every corner of the globe. Also, the deal will meaningfully grow its customer base to include financial institutions of all sizes, new market entrants and retailers.
The relationship will dramatically burgeon the company’s target addressable market for organizations of all scales. AWS’ cloud-based architecture will allow Global Payments to capitalize on modern open-banking initiatives.
Additionally, the company’s investment grade balance sheet, strong cash flows and solid liquidity lead to significant financial flexibility to enable it to successfully chase its strategic priorities.
Shares of the company have gained 12% in a year’s time compared with its industry’s growth of 9.9%.
Other companies in the same space, namely Visa Inc. V has rallied 12% in a year’s time while the stocks of American Express Company AXP and Discover Financial Services DFS have lost 18% and 32.4%, respectively.
Global Payments carries a Zacks Rank #3 (Hold), currently. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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