- Stephens analyst Charles Nabhan initiated coverage on Shift4 Payments Inc (NYSE:FOUR) with an Equal- Weight rating and a price target of $80.
- The analyst view factors in premium share valuation of 13.6x 2024 EV/EBITDA compared to its peer group median of 9.1x.
- He notes that FOUR’s current revenues are driven by its core verticals (hotel, restaurant) and expects Finaro acquisition to enhance its processing capabilities in Europe.
- Nabhan believes FOUR has successfully leveraged its gateway relationships to achieve higher market share by discounting through its SkyTab offering. He expects this to support above-peer growth during an economic downturn.
- Nabhan has confidence in the 2023 outlook, which reflects management’s strong execution track record in 2022, efficient Gateway sunset strategy and accelerated digitization of restaurant/hotel industries.
- The analyst sees FOUR’s transition to a full stack provider from a legacy processor agnostic gateway as in the initial stage. He expects this to boost gross profit per share by 4x and contribute around half of the volume growth.
- The analyst sees the scope of conversion of FOUR’s Gateway Only volumes of around $150 billion (yields $0.04 per transaction) to enterprise-to-enterprise volume. He expects the conversion to yield 50 bps per transaction and assumes a volume conversion of $15 billion-$20 billion annually.
- Going forward, the analyst sees the ability of restaurants to pass along higher costs to a weakening consumer amid an unfavourable macroeconomic environment as a matter of concern.
- Price Action: FOUR shares traded lower by 2.90% at $70.91 on the last check Friday.
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