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EXECUTIVE SUMMARY

12-Month Price Target: $142

Current Price: $105.71

Implied Upside: 34.3%

Rating: STRONG BUY

Risk Assessment: MODERATE

INVESTMENT THESIS

Global Payments (GPN) presents a compelling investment opportunity at current levels, with three key catalysts driving potential outperformance in 2025:

Q4 2024 momentum in Merchant Solutions with strong POS adoption (added ~3,000 new locations)
Strategic sale of AdvancedMD for $1.125 billion at attractive multiple with $700M earmarked for shareholder returns
Successful integration of EVO Payments enhancing B2B capabilities and geographic reach

VALUATION METHODOLOGY

Our $142 price target reflects:

Forward P/E multiple of 13x (below historical average, reflecting current market dynamics) applied to our 2025 EPS estimate of $10.92
EV/EBITDA multiple of 11x on projected 2025 EBITDA, reflecting recent sector compression
DCF analysis using 9.5% WACC (adjusted for higher rate environment) and 3% terminal growth

KEY GROWTH DRIVERS

Recent Performance Highlights

Q3 2024 adjusted net revenue increased 6% to $2.36 billion
Adjusted operating margin expanded 40 basis points to 46.1%
Added 92 new software partners in Q3, up 60% year-over-year

Macro Environment

U.S. GDP growth projected at 2.4% for 2025, supporting payment volumes
Fed funds rate expected to decrease to 3.88%, reducing funding costs
Resilient high-income consumer spending evidenced by recent holiday data

RISK FACTORS

Near-term margin pressure from technology investments and compensation costs
Integration execution risk from recent acquisitions
Increasing competition in digital payments space
Potential policy changes under new administration

FINANCIAL METRICS

Key Financial Metrics for Q4 2024E:

Revenue Growth: 5-6%
Operating Margin: 46.1%
EPS Growth: 11-12%
Free Cash Flow Conversion: 92%

Projected Metrics for 2025E:

Revenue Growth: 8-9%
Operating Margin: 46.6%
EPS Growth: 13-14%
Free Cash Flow Conversion: 93%

STRATEGIC POSITIONING

Recent developments reinforce GPN's leadership in:

Integrated payments with strong new partner acquisition
B2B payments expansion through EVO integration
Software-driven solutions with continued innovation
International market penetration

RECOMMENDATION RATIONALE

Our STRONG BUY recommendation at current price of $105.71 is based on:

Current valuation represents significant discount to intrinsic value
Strong Q3 2024 execution with improving operating leverage
Strategic initiatives creating clearer growth path
Robust free cash flow generation supporting shareholder returns

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Disclaimer

The user Maxell holds no position in NYSE:GPN. Simply Wall St has no position in any of the companies mentioned. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Global Payments will reach new heights with a 34% upside potential