Morgan Stanley Raises Shift4 Payments’ Target Price to $86, Reiterates Equal-weight Rating

Morgan Stanley raised their stock price forecast on Shift4 Payments to $86 from $46, reiterating an “Equal-weight” rating on the integrated payment processing and technology solutions provider and said the company showed strong execution, with yet another attractive deal, in the fourth quarter and now expects signs of an inflection in its recovery in Q1.

Early this month, the Allentown, Pennsylvania-based company reported Q4 Non-GAAP earnings per share (EPS) of -$0.05, missing Wall Street’s consensus estimates of $0.07. The company also missed GAAP EPS by a large margin. Shift4 Payments also said its revenue rose 4.4% year-on-year to $210.9 million but came lower than the market expectations by $4.66 million.

For the full year 2021, the company forecasts revenue in the range of $1.1-$1.2 billion and end-to-end payment volume between $36-$38 billion. Shift4 Payments also expects adjusted EBITDA in the range of $155-160 million.

“We expect that the company will continue to be aggressive looking for both technology and scale acquisition opportunities. However, given valuation, we remain EW on our typical 12-18 month recommendation view, but we believe that Shift4’s current size and strength of management gives the company enhanced longer-term prospects for growth (both organically and inorganically),” noted James E Faucette, equity analyst at Morgan Stanley.

“As the economy re-opens, Shift4 should benefit from the rebound of their existing hospitality merchants. The company also onboarded new hospitality merchants throughout the pandemic, as its value as a lower cost, bundled solution payments provider resonated with these highly affected merchants that needed to revisit their payments technology. This means that not only will Shift4 benefit from the new relatively small book of business that they are onboarding, but that book of the business itself should see pretty sizable growth as the economy starts to open up.”

Shift4 Payments’ shares, which surged over 140% since the company’s IPO last June, traded 1.27% higher at $81.60 on Thursday.

Eight analysts who offered stock ratings for Shift4 Payments in the last three months forecast the average price in 12 months at $92.67 with a high forecast of $115.00 and a low forecast of $75.00. The average price target represents a 15.00% increase from the last price of $80.58. Of those eight equity analysts, six rated “Buy”, two rated “Hold” while none rated “Sell”, according to Tipranks.

Other equity analysts also recently updated their stock outlook. Shift4 Payments had its price target upped by stock analysts at Evercore ISI to $101 from $75. The brokerage presently has an “outperform” rating on the stock. Piper Sandler set an “overweight” rating and gave a price objective of $81. Truist increased their price target to $100 from $70.

“As a prominent gateway in the hospitality vertical, Shift4 is well-positioned to use its existing portfolio to grow its merchant acquiring business, delivering growth in-line with peers, despite near-term COVID-19 headwinds. Upside opportunity from fast recovery, upselling, and M&A is fairly balanced by execution risk and key-man risk,” Morgan Stanley’s Faucette added.

Check out FX Empire’s earnings calendar