On Thursday, Shift4 Payments (NYSE:FOUR) had its price target lowered by Evercore ISI to $100 from $105, though the firm kept its Outperform rating on the stock. The revision followed the company's first-quarter performance, where it missed the consensus adjusted EBITDA by 4% due to lower-than-expected end-to-end (E2E) volumes.
Despite this, the company's management reaffirmed their net revenue guidance for 2024, highlighting a significant expected increase in the second half of the year as new contracts in sectors like stadiums, hotels, and restaurants begin to generate revenue and earnings.
Shift4 Payments has adjusted its projections for the year, narrowing the upper range while lifting the lower end of its E2E payment volume forecast. Additionally, the company has raised the lower end of its adjusted EBITDA guidance. The firm's adjusted free cash flow (FCF) conversion guidance for 2024 has also been improved, now anticipated to exceed 60% from the previously projected 58%.
The company announced in the first quarter the acquisition of Revel Systems and authorized a $500 million share repurchase program. Evercore ISI remains positive on Shift4 Payments' prospects, citing multiple drivers for potential revenue growth and margin expansion. These include increased adoption of Skytab, competitive pricing, a growing presence in core industries, international expansion, and cost management strategies.
Evercore ISI has made adjustments to its earnings estimates for Shift4 Payments, reducing the 2024 adjusted EBITDA forecast by $20 million to $660 million due to a slightly lower revenue forecast. The 2025 adjusted EBITDA estimate has been trimmed by $10 million to $840 million, reflecting modestly reduced margin expectations.
However, the 2026 adjusted EBITDA estimate remains unchanged at $1.02 billion. The target price has been set at $100 based on a 13x multiple of the firm's projected 2025 enterprise value to EBITDA, which is consistent with the prior valuation model. The analyst maintains the Outperform rating and continues to list Shift4 Payments as a #4 Top Pick.
InvestingPro Insights
In light of Evercore ISI's recent price target adjustment for Shift4 Payments (NYSE:FOUR), it's important to consider some additional insights. According to InvestingPro data, Shift4 Payments has a market capitalization of $5.35 billion and is trading at a P/E ratio of 43.2, which is relatively high, reflecting a premium the market places on the company's earnings. The company's P/E ratio, adjusted for the last twelve months as of Q4 2023, stands at 32.26. This high earnings multiple, coupled with a P/E ratio that is lofty relative to near-term earnings growth, suggests that investors are expecting significant growth, which is in line with the management's optimistic revenue guidance for 2024.
Revenue has grown by 28.65% in the last twelve months as of Q4 2023, indicating a robust upward trajectory. However, the stock has experienced notable price volatility, with a 1-month price total return of -15.66% and a 3-month price total return of -24.19%. Despite these fluctuations, InvestingPro Tips highlight that net income is expected to grow this year and that the company's liquid assets exceed short-term obligations, which points to a healthy financial position.
For investors seeking a deeper dive into Shift4 Payments, InvestingPro offers additional tips to help guide investment decisions. Among the 11 additional tips available, it's worth noting that analysts predict the company will be profitable this year and that the stock has been profitable over the last twelve months. Investors can access these tips and more at https://www.investing.com/pro/FOUR, and by using the coupon code PRONEWS24, they can enjoy an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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