Expanding Burger King Partnership Will Open New Opportunities In 2025

Key Takeaways

• Expanded partnership with Burger King and acquisition of Delaget drive growth through new implementations, cross-sell opportunities, and increased customer lifetime value in key markets.
  
• Success in Payments Services and Engagement Cloud segments enhances profitability through improved transaction counts, customer loyalty, and strategic M&A activities supporting EBITDA growth.
  
• Heavy reliance on aggressive investment and new products could strain cash flows and challenge profitability amid competitive pressures and integration risks.

Catalysts

Provides omnichannel cloud-based hardware and software solutions to the worldwide.

• Expansion of the partnership with Burger King, including the addition of new product lines, is expected to accelerate revenue growth in 2025 due to increased implementations and higher customer lifetime value.
  
• The acquisition of Delaget enhances PAR Technology’s product offering, facilitating higher cross-sell opportunities and revenue growth by entering over 25,000 new sites covering top restaurant concepts.
  
• Strong performance in Payments Services, including new customer sign-ups and successful cross-selling, is likely to enhance profitability through higher transaction counts and improved processing economics, positively impacting net margins.
  
• Growth in the Engagement Cloud segment, driven by new Tier 1 customer wins and product consistency with Punchh, suggests potential for increased revenue and margin expansion through enhanced customer loyalty and retention initiatives.
  
• Continued focus on operational efficiencies and cost management, alongside strategic M&A activities, is expected to support sustainable growth in adjusted EBITDA, increasing the company’s earnings profile.

PAR Technology Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming PAR Technology's revenue will grow by 18.6% annually over the next 3 years.
• Analysts are not forecasting that PAR Technology will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate PAR Technology's profit margin will increase from -24.5% to the average US Electronic industry of 9.0% in 3 years.
• If PAR Technology's profit margin were to converge on the industry average, you could expect earnings to reach $57.5 million (and earnings per share of $1.17) by about July 2028, up from $-94.1 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 91.8x on those 2028 earnings, up from -30.3x today. This future PE is greater than the current PE for the US Electronic industry at 23.8x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.96%, as per the Simply Wall St company report.

PAR Technology Future Earnings Per Share Growth

Risks

• The potential delay in rolling out new products to Burger King could affect projected revenue growth and lead to uncertainty in achieving the timeline for expected revenue from these rollouts.
  
• The company's expansion relies heavily on aggressive investment and new product launches, which could strain cash flows and affect net margins if these efforts do not succeed as predicted.
  
• PAR Technology's net loss from continuing operations for the full year shows that despite revenue growth, profitability remains a challenge, potentially impacting earnings outlook.
  
• Integration risks associated with recent acquisitions, such as Delaget, could lead to unforeseen costs or slower-than-expected performance improvements, affecting both revenue and margins.
  
• The competitive restaurant technology landscape could create pressure on the company's pricing and market share, potentially impacting future revenue growth and margin expansion.

Valuation

• The analysts have a consensus price target of $85.576 for PAR Technology 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 $105.0, and the most bearish reporting a price target of just $69.61.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $640.1 million, earnings will come to $57.5 million, and it would be trading on a PE ratio of 91.8x, assuming you use a discount rate of 8.0%.
• Given the current share price of $70.51, the analyst price target of $85.58 is 17.6% 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.