Mizuho Securities analyst Dan Dolev initiated coverage on Shift4 Payments Inc (NYSE:FOUR) at a Buy rating with a price target of $80.
The analyst sees a gateway-only volumes runway of $150 billion that can be converted into end-to-end (E2E) volumes at a little additional cost.
The analyst thinks this can facilitate 4x better economics, with an incremental gross profit contribution of around 25bps-30bps.
However, Dolev assumes that only 40% of the runway will be realized by 2025, driving an estimated incremental gross profit of $150 million-$200 million.
This represents 25% of its estimated 2022-2025 total incremental gross profit of $650 million-$700 million, 10% above consensus by 2025.
The analyst is pleased with FOUR’s lower cost-to-customer vs. its peers and efficient capital deployment strategy.
Dolev expects revenue of $952 million in 2023 and $1.21 billion in 2024.
Price Action: FOUR shares are trading higher by 2.55% at $68.39 on the last check Tuesday.
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