Digital Payments And E-Commerce Will Redefine European Markets

Key Takeaways

• Nexi is poised for outsized revenue and margin growth through digital payment adoption, market share gains, and expansion of sales channels across Europe.
  
• Strong bank partnerships, innovative payment solutions, and favorable market dynamics support durable margins, risk mitigation, and undervalued cash generation potential.
  
• Loss of key partners, competitive threats from emerging payment technologies, integration risks, and overexposure to Italy all jeopardize Nexi's future revenue growth and profitability.

Catalysts

Provides electronic money and payment services to banks, small and medium-sized enterprises, large international corporations, institutions, and public administrations in Italy, Nordics and Baltics, Germany, Austria, Switzerland, Poland, Southeast Europe, and internationally.

• Analysts broadly agree that Nexi's integrated payments strategy for SMEs and development of new sales channels will drive revenue and net margin growth, but this likely understates the potential given the accelerating shift from cash to digital payments across Europe and Nexi's ability to gain market share in both existing and underpenetrated regions, pointing to outsized top-line and margin expansion over the next several years.
  
• While consensus expects efficiency gains and EBITDA margin improvement from cost control and capital allocation, the market is undervaluing Nexi's already material excess cash generation-set to exceed eight hundred million euro this year with further upside potential from continued reduction in CapEx intensity and integration costs, suggesting a much faster rate of EPS and free cash flow growth than analysts currently model.
  
• Nexi's breadth of successfully renewed and expanded large-scale bank partnerships, especially in Italy but increasingly across core European markets, ensures both retention of high-value clients and creates a robust platform for cross-selling value-added services, fundamentally underpinning long-term net margin durability and risk mitigation.
  
• The company's unique positioning as both a pan-European consolidator and agile innovator in embedded and alternative payments (with initiatives such as Klarna and Vero wallet integrations) puts it at the leading edge of capturing the ongoing surge in e-commerce and mobile commerce, directly translating into outsized transaction volumes and higher incremental revenues versus peers.
  
• Regulatory-induced higher barriers to entry and ongoing industry consolidation are set to disproportionately benefit incumbents like Nexi, enabling stronger pricing power, lower competitive churn, and improved earnings stability, all of which remain underappreciated in current valuations.

Nexi Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Nexi compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Nexi's revenue will decrease by 16.1% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.8% today to 29.1% in 3 years time.
• The bullish analysts expect earnings to reach €1.1 billion (and earnings per share of €0.92) by about August 2028, up from €304.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 13.4x on those 2028 earnings, down from 22.1x today. This future PE is greater than the current PE for the IT Diversified Financial industry at 9.9x.
• Analysts expect the number of shares outstanding to decline by 2.76% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.7%, as per the Simply Wall St company report.

Nexi Future Earnings Per Share Growth

Risks

• Ongoing loss and migration of key bank distribution partners in Italy is putting downward pressure on managed transaction volumes, which, if not offset by alternative channels, could negatively impact Nexi's future revenues and growth trajectory.
  
• Secular trends like the rise of decentralized finance and blockchain-based payment systems, as well as increasing consumer adoption of alternative payment methods (e.g. Vero, Klarna, and Buy Now Pay Later), threaten to erode Nexi's relevance as a traditional payment processor, potentially reducing both transaction volumes and fee-based revenue streams over the long term.
  
• Intensifying price-based competition across Europe, especially as the market becomes more commoditized and global tech giants expand, is likely to create sustained margin pressure, making it more difficult for Nexi to expand net income or maintain current EBITDA margins.
  
• Delays, execution risk, or limited synergy realization in integrating large past acquisitions (such as SIA and Nets) could continue to result in residual one-off costs and operational complexity, reducing net earnings and return on invested capital over time.
  
• Heavy reliance on Italy as a core cash-generating market exposes Nexi to region-specific economic weakness or regulatory shifts; an Italian economic downturn or heightened local regulation could sharply curtail top-line growth and increase the volatility of group earnings.

Valuation

• The assumed bullish price target for Nexi is €8.75, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Nexi's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €8.75, and the most bearish reporting a price target of just €4.1.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €3.7 billion, earnings will come to €1.1 billion, and it would be trading on a PE ratio of 13.4x, assuming you use a discount rate of 13.7%.
  
• Given the current share price of €5.47, the bullish analyst price target of €8.75 is 37.5% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.