Will Shift4 Stock Go Up?

Software and payment processing solutions provider Shift4 Payments, Inc. (NYSE: FOUR) has undergone somewhat of a metamorphosis since its founding in 1999.

When Jared Isaacman launched the company, the goal was to process of payments securely and reliably for businesses of all sizes.

Over the years, it has gone on to expand its product pipeline substantially and establish itself as a leading player in the payments industry.

The share price however has been choppy over the past couple of years leading investors to wonder whether the stock is going to move higher in the near-to-medium term. So what does the future hold for Shift4 Payments?

Shift4 Payments Emerges as Leading Fintech Firm

Shift4 Payments was founded based on the idea of equipping businesses with the best payment processing tools in the market. In its early days, the company invested most of its resources to develop secure payment processing technology and garnered a reputation for reliability and good customer service.

By 2017, Shift4 Payment began to expand through strategic acquisitions. Its most notable acquisition was Harbortouch, which is a top point-of-sale (POS) systems provider. That deal enabled Shift4 Payments to extend its services to a wider range of businesses.

Following this purchase, the company, which operated as the Lighthouse Network at the time, completed the purchase of Shift4 Corporation and adopted the name Shift4 Payments.

Fast forward to today and the enterprise has further expanded by snapping up Finaro, a cross-border payments firm for eCommerce services, and The Giving Block, a cryptocurrency fundraising platform.

These acquisitions are key growth drivers for Shift4 because they unlock access to the global market.

Shift4 IPO Debut 

In June 2020, Shift4 Payments went public on the New York Stock Exchange. The IPO was an important milestone for the company and infused it with the cash needed to fuel faster growth.

It also permitted the launch of new payment solutions with added security features for the benefit of merchants and customers alike.

As businesses have increasingly switched to online and contactless payments, the company reoriented its solutions to address the demands of merchants. In the 2020-21 era in particular, the company created solutions to support contactless payments as a way of keeping businesses afloat at a time of social distancing.

This period brought challenges as well as opportunities for Shift4 Payments. According to a press release from 2020, the company saw merchant transaction volume persistently increase across the country despite surging health concerns.

To give a sense of how demand increased at the time, Shift4 processed more than 19.7 million payment transactions as of the week beginning June 21 in the year 2020—a 164% increase from the March lows. The transaction volume of Shift4 was also more than that of the same period in 2019. 

Furthermore, 2021 has seen an accelerated recovery in transaction volumes, with seven of the eight highest volume days in Shift4’s history until then occurring during the last two weeks of February 2021.

Expanding Beyond Payments

Apart from its main payment processing services, Shift4 Payments has diversified to vertical integrate and has already developed an impressive product line beyond its core services.

That has allowed it to move into areas like hospitality technology, e-commerce solutions, and integrated payment systems.

With so many strings to its bow, Shift4 can now be viewed as a fully fledged provider of payment and technological solutions for businesses across sectors.

The transition is a testimony of the organization’s ability to shift to the needs of an evolving payment environment. It now ranks among the leading players in the payments industry so what does the future hold?

Revenue Growing Fast Each Year

Shift4 has been EBITDA positive since 2004, with growing volume and revenue in double digits every year, including the economic crises and darkest times of the pandemic.

For the most recent quarter, which ended March 2024, the end-to-end (E2E) payment volume of $33.4 billion was an increase of 50% from Q1 2023.

In Q1 2024 end-to-end payment volume was more than five times higher than levels seen in the same period in 2020.

Gross revenue came in at $707.4 million, up 29% from Q1 2023, while gross revenue less network fees was $263.7 million, up 32% year over year.

Gross profit was reported at $175.9 million, reflecting 27% growth from the prior-year quarter and a 4-year CAGR of 42%.

The company achieved a 36% growth in adjusted EBITDA, which reached $121.7 million. Adjusted Free Cash Flow also saw a healthy increase of 34.1% year over year to $78.2 million.

The company is expected to maintain the momentum of strong growth achieved so far through further innovation, as well as expansion into new markets, and resulting value creation for the customers.

Management expects end-to-end payment volume of $167 billion, representing 53% year-over-year growth to $175 billion this year. They are targeting adjusted EBITDA of $640 million to $675 million, a high growth rate from the previous year.

Is Shift4 Payments Undervalued?

Despite the fact that the stock appears to be a bit volatile these days, it is valued at 16.45x non-GAAP forward earnings, significantly more than its peers. Even so, that’s still down about 75% in comparison with the five-year average.

And to top it off, the stock is trading at 0.98x forward sales, 60% below its industry average of 2.56.

The consensus estimate among 16 analysts is for the stock to rise by as much as 50% over the next twelve months.

Will Shift4 Stock Go Up?

Shift4 stock has the potential to rise by as much as 26.2% to fair value of $85.83 per share according to the consensus of 23 analysts.

Supporting the bullish investment thesis is the fact that management provided clear evidence that it should be able to scale up in the near future. 

The bull case can be summarized as the company having multiple revenue streams, a track record of innovations, shrewd acquisitions and strong financials.

It has achieved an overall ‘Buy,’ with 14 out of 16 analysts thinking highly about the company’s prospects.

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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.