ATM-as-a-Service And Managed Services Will Secure Future Resilience

Key Takeaways

• Expanding managed services, recurring revenues, and service-led strategy are boosting margins, customer retention, and overall earnings quality.
  
• Sustained ATM demand and large-scale partnerships enhance network reach, supporting revenue stability and ongoing top-line growth.
  
• Rapid digital payment adoption, shrinking ATM demand, legacy dependence, fintech competition, and high debt levels threaten NCR Atleos' growth, margins, and financial flexibility.

Catalysts

A financial technology company, provides self-directed banking solutions to financial institutions, merchants, manufacturers, retailers, and consumers in the United States, rest of the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

• Strong expansion and momentum in ATM-as-a-Service and managed services with 44% growth in unique customers and a robust pipeline, reflecting the ongoing trend of banks outsourcing non-core operations and driving higher-margin, recurring revenue growth going forward.
  
• Sustained demand for ATM infrastructure in both mature and emerging markets due to persistent cash usage and underbanked populations, supporting a stable installed base and providing revenue resilience and visibility despite the broader push toward digital payments.
  
• Shift to a service-first operating model and improved customer satisfaction is driving increased wallet share, higher-margin service revenues, and stronger customer retention, which should lead to positive net margin expansion and enhanced earnings quality.
  
• Investments in technology innovation (AI-driven dispatch, TAP-enabled machines, next-generation self-service platforms) are facilitating the transition from hardware-centric to software and service-led revenue, helping to further grow recurring revenues and increase operating leverage/margins over time.
  
• Recent and upcoming large-scale partnerships (e.g., 7-Eleven Allpoint integration, U.K. deposit expansion) are extending NCR Atleos' network reach, driving higher transaction volumes and ARPU, and supporting top-line growth through scale advantages and increased cross-selling opportunities.

NCR Atleos Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming NCR Atleos's revenue will grow by 3.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 2.7% today to 7.5% in 3 years time.
• Analysts expect earnings to reach $354.9 million (and earnings per share of $3.85) by about July 2028, up from $116.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 11.2x on those 2028 earnings, down from 17.0x today. This future PE is lower than the current PE for the US Diversified Financial industry at 17.5x.
• Analysts expect the number of shares outstanding to grow by 1.57% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.27%, as per the Simply Wall St company report.

NCR Atleos Future Earnings Per Share Growth

Risks

• Accelerating consumer and bank adoption of digital payments, mobile wallets, and contactless transactions could gradually erode the relevance and demand for ATM infrastructure and cash-focused services, undermining NCR Atleos' core revenue base and limiting long-term growth prospects-impacts likely to manifest in top-line revenue and future recurring revenue streams.
  
• Ongoing bank branch consolidations and closures globally may result in a shrinking ATM footprint as financial institutions invest more in digital ecosystems, leading to contracted deployment opportunities for NCR Atleos and putting downward pressure on both hardware and services revenue, as well as recurring service margins.
  
• The company remains highly exposed to legacy hardware and parts, with 20% of the revenue base stemming from this segment and a significant portion still reliant on servicing and replacement cycles. Margin compression and risk of obsolescence in hardware offerings-amidst industry preference shift to banking SaaS and cloud-could weigh on revenue growth and sustainable net margin expansion over the long term.
  
• Intensifying competition from fintech disruptors and challenger banks offering digital-first, branchless banking services threatens NCR Atleos' pricing power and ability to secure new contracts with large financial institutions, potentially leading to customer attrition, reduced contract sizes, and increased downward pressure on both total revenue and earnings.
  
• Elevated debt levels ($2.6 billion net debt, with leverage targeted just under 3x) create ongoing pressure to prioritize deleveraging over growth investments or shareholder returns. This constrains financial flexibility to accelerate strategic pivots or M&A, and exposes the company to higher interest expenses and greater earnings risk if industry secular trends shift more abruptly toward cashless banking.

Valuation

• The analysts have a consensus price target of $39.119 for NCR Atleos based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $60.0, and the most bearish reporting a price target of just $30.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.7 billion, earnings will come to $354.9 million, and it would be trading on a PE ratio of 11.2x, assuming you use a discount rate of 10.3%.
• Given the current share price of $26.85, the analyst price target of $39.12 is 31.4% 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.