On Wednesday, Citi updated its outlook on Shift4 Payments (NYSE:FOUR), increasing the stock's price target to $92 from $87 while sustaining its Buy rating. The firm's analyst highlighted Shift4's stand-alone appeal, despite the market's focus on potential mergers and acquisitions. The analyst believes that the company is well-positioned for above-market growth due to its opportunities in various sectors, including restaurants, hotels, and arenas, as well as its cost and free cash flow efficiency.
Shift4 Payments is expected to continue its trajectory of growth, leveraging its SkyTab solution in restaurants, expanding its geographic presence, and increasing average revenue per user (ARPU). In the hotel industry, the company is anticipated to benefit from integration and cost advantages, new market entries, and ARPU growth from gateway conversions. The arenas segment should see an uplift from the integration of Appetize and VenueNext.
The company's focus on maintaining a flat headcount and scaling operations was also noted as a positive factor for its financial health. This strategy is aimed at bolstering cost efficiency and free cash flow, which are considered crucial for the company's sustainable growth.
Citi addressed investor concerns regarding the integration of acquisitions and the management of convertible debt, suggesting these issues are manageable in the near term. The analyst expressed confidence in Shift4 Payments' ability to navigate these challenges without significantly impacting investor sentiment.
Finally, the analyst justified the raised price target by pointing to the reasonable forward EBITDA multiple in light of Shift4 Payments' profitable growth expectations. The company's financial performance and strategic initiatives are expected to support its valuation and continue attracting investor interest.
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