Is Cardtronics Stock A Buy?

Cardtronics PLC (NASDAQ:CATM) runs the largest network of automated teller machines (ATMs) in the world. Its debit network spans 10 countries and provides access to banking services for banks that otherwise lack a physical retail footprint.

In the current days of contactless payments and social distancing, it’s a moneymaker, but is Cardtronics stock a Buy?

NCR Corporation certainly thinks so. The retail and hospitality tech firm offered $1.7 billion ($39 per share) to buy out the ATM operator. It trumps the previous buyout offer from Apollo Global Management and Hudson Executive Capital of $35 per share in December.

This bidding war shows just how lucrative these 285,000 machines can be. And once they’re outfitted with NCR’s payments platform, these machines will become even more useful for both consumer and business customers.

Will Cardtronics leave investors overdrawn?

Cardtronics Has A Global ATM Footprint

Cardtronics is a global ATM operator with a wide retail footprint. It teams up with lenders to let customers withdraw cash from its ATMs using their Visa (V) or Mastercard (MA) branded debit cards.

Everyone from large financial institutions to community banks and credit unions can integrate its ATMs, which can be found in North America, Africa, Europe, and Asia-Pacific.

Stores, restaurants, gyms, and other businesses were shuttered by municipal stay-at-home orders. With curfews also in place, access to financial services isn’t easy to provide in this new economy.

The company was founded in 1989 and includes Allpoint and Cashzone machines. It works with ATM operators to provide a seamless approval and transaction network.

And with integration into NCR, the possibilities expand. NCR provides point of sale (POS) equipment and software, ATMs, self-service kiosks, servers, and more.

It’s a full-service information technology company that more clearly integrates the ATM network into business payroll and other IT infrastructure. This includes self-checkout kiosks at major retailers like Walmart (WMT).

Although it was enough for NCR to buy, is Cardtronics still a buy for investors?

Is Cardtronics Stock a Buy?

Cardtronics PLC started 2021 with a market capitalization over $1.80 billion and a P/E ratio of 82x. Its share prices plummeted last year to a 52-week low of $15.71 and remained squeezed for most of the year.

Stock prices shot back up near pre-pandemic prices when it entered into a Definitive Agreement to be acquired by Apollo Global Management and Hudson Executive Capital for $35.00 per share, a transaction estimated to be worth $2.3 billion.

Not long after the deal was announced in NCR’s offer was received and was more competitive. It put an extra $4 per share into investors’ pockets. This bidding war also drove share prices over the $40.00 trading point, which could be a long wait for investors who try to profit now.

The company earned $279.4 million in revenue in the third quarter of 2020, down over 20 percent year-over-year from the $351.5 million earned in the same quarter of the prior year. Still, it remained profitable, pulling $0.49 in adjusted net income.

Fintech companies like Credit Karma and Chime were added to the network, while it expanded relationships with U.S. Bank and ScotiaBank. Meanwhile, its retailer footprint grew with the addition of over 600 Cardtronics ATMs at Casey’s General Stores.

It has $98.4 million in operating cash flow heading into the 2020 holiday season, and its books had to look sweet to elicit the bidding war it sparked. That doesn’t mean it’s without risk.

Cardtronics ATMs Are Frequently In Shut Locations

While its ATMs are great for social distancing, most are located inside businesses that closed. This left them sitting with no customers available to access them and greatly crippled the company’s transaction volume.

Adding to the problems, unemployment is high, and many businesses closed for good heading into 2021. This leaves both sides of the economy struggling to make ends meet. Cash withdrawals could end up becoming less common, as they’re often used for discretionary spending.

Rising e-commerce usage, cryptocurrency, and other electronic payment methods could make even ATMs obsolete.

We long envisioned a society where banks are replaced with machines, but the reverse could trend in coming generations. People could prefer a human touch, even if everything is still driven by artificial intelligence (AI) in the background.

Traditional retail banks like Wells Fargo (WFC) and payment processors like Mastercard (MA) face problems growing in the 2020s. Europe is also cracking down on its reliance on American fintech. These companies may take a lot of media headlines, but both Cardtronics and NCR are both in the crosshairs.

Cardtronics Has Rivals Galore

Although its one of the largest, Cardtronics isn’t the only ATM operator in the world. Bancolumbia, for example, as over 30,000 ATMs in South America (a market Cardtronics hasn’t penetrated yet) and is valued at over $4 billion. Euronet Worldwide and Deibold Nixdorf also have impressive market presence.

This is just the legacy competition – fintech apps like Cash App, Venmo, and Zelle make P2P money transfers easier than ever, reducing the need for cash.

And there’s Bitcoin to consider. It’s meteoric rise in 2020 sparked another bull run on the crypto currency. Cryptocurrency is also more mainstream with acceptance by PayPal, USAA, and more.

Is Cardtronics Stock a Buy? The Bottom Line

Cardtronics is a global ATM operator that proved it’s worth buying in 2020. It received two offers by January 2021 and its value shot above the $39.00 high offer. This bidding war means there’s value in its product.

However, ATMs are struggling, and the company’s profits plummeted last year during the first wave of lockdowns. This means there’s going to be a lot of work needed to squeeze value out while competing against an aggressively changing fintech market. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.