Rising Digital Payments Will Undermine ATMs Yet Spur Software

Key Takeaways

• Sustained digital payment adoption and cashless trends threaten long-term demand for Diebold Nixdorf’s physical products and limit new market growth potential.
  
• Transition toward software and services is promising but faces execution and scaling risks amid mounting competition and external cost pressures.
  
• Secular shifts to digital payments and bank digitization threaten Diebold Nixdorf’s long-term hardware demand, recurring revenue, and profitability amid rising competition and macroeconomic risks.

Catalysts

Engages in the automating, digitizing, and transforming the way people bank and shop worldwide.

• While Diebold Nixdorf is seeing strong product order growth driven by increasing automation and self-service adoption in banking and retail, the accelerating shift toward digital payments and branchless banking continues to erode the long-term demand for physical ATMs and self-service terminals, threatening the sustainability of future revenue streams.
  
• Although the company’s expansion into emerging markets such as India, Asia Pacific, and the Middle East could expand its installed base and increase recurring services and software revenues, global moves toward a cashless society and rapid mobile-first adoption may limit the ultimate size and growth trajectory of these markets, risking future topline growth.
  
• While management’s shift to a recurring-revenue and software-driven model is on track to improve margins and provide cash flow stability, ongoing product mix transition away from legacy hardware involves execution risk and may result in slower than expected scaling of software and services, creating earnings risk if new business lines fail to reach critical mass.
  
• Despite operational improvements like LEAN manufacturing, cost optimization, and mitigations against tariffs that have driven near-term margin expansion, persistent supply chain disruptions and rising input costs—especially in key manufacturing geographies subject to increased tariffs—could pressure margins and limit the effectiveness of these cost initiatives over time.
  
• Even as Diebold Nixdorf makes strategic progress in AI-driven retail solutions and omnichannel transaction technologies, intensifying competition from fintech and integrated payments providers raises the risk of margin compression and market share loss, potentially making future earnings and free cash flow growth difficult to sustain.

Diebold Nixdorf Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Diebold Nixdorf compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Diebold Nixdorf's revenue will grow by 3.4% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -0.3% today to 6.1% in 3 years time.
• The bearish analysts expect earnings to reach $249.9 million (and earnings per share of $6.65) by about July 2028, up from $-10.2 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 bearish analyst cohort, the company would need to trade at a PE ratio of 11.2x on those 2028 earnings, up from -216.5x today. This future PE is lower than the current PE for the GB Tech industry at 19.5x.
• Analysts expect the number of shares outstanding to decline by 0.81% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.08%, as per the Simply Wall St company report.

Diebold Nixdorf Future Earnings Per Share Growth

Risks

• The continued global shift toward digital payments and the trend toward a cashless society threaten Diebold Nixdorf’s core markets, potentially reducing long-term demand for ATMs and cash recyclers, which could depress revenue growth and erode future earnings power.
  
• Accelerating bank branch closures and increased banking digitization, especially in developed markets, may result in a shrinking addressable market for physical hardware and recurring service contracts, negatively impacting recurring revenues and overall margins.
  
• The company’s recent positive results are heavily dependent on cyclical ATM refresh cycles and banking hardware upgrades, both of which face secular decline as banks and retailers increasingly invest in fully digital solutions rather than hardware, increasing risk to sustainable long-term earnings.
  
• Diebold Nixdorf faces risks from intensifying competition by fintech and integrated payment solution providers, which could limit its ability to win future deals and pressure pricing, thus affecting revenue growth and profit margins in both its banking and retail divisions.
  
• Exposure to volatile currency fluctuations and ongoing macro uncertainty add unpredictability to net earnings and free cash flow, and while recent cost discipline has improved results, any macroeconomic or supply chain shocks could quickly reverse these gains and pressurize margins.

Valuation

• The assumed bearish price target for Diebold Nixdorf is $60.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Diebold Nixdorf's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $80.0, and the most bearish reporting a price target of just $60.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $4.1 billion, earnings will come to $249.9 million, and it would be trading on a PE ratio of 11.2x, assuming you use a discount rate of 9.1%.
• Given the current share price of $59.25, the bearish analyst price target of $60.0 is 1.2% higher. The relatively low difference between the current share price and the analyst bearish price target indicates that they believe on average, the company is fairly priced.
• 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.