On Tuesday, Evercore ISI adjusted its outlook for Shift4 Payments (NYSE:FOUR), reducing the price target to $105 from $110, while reaffirming an Outperform rating on the stock. The firm's analysis followed Shift4 Payments' fourth-quarter performance, which aligned with consensus expectations for adjusted EBITDA, despite net revenue falling short of forecasts.
The shortfall in net revenue was counterbalanced by more effective expense management.
Shift4 Payments' guidance for 2024 net revenues and adjusted EBITDA is in line with both Evercore ISI's and the consensus estimates. Management anticipates organic growth to exceed 25% and projects a 250 basis point expansion in organic margins for the year. The firm noted the potential for upside to the company's guidance throughout the year, citing what it perceives as a conservative stance by management.
The firm remains positive on the outlook for Shift4 Payments, citing various factors that could drive significant net revenue growth and margin expansion. These factors include the growing adoption of Skytab, competitive pricing, and an expanding presence in core sectors such as restaurants, gaming, sports, and entertainment.
Moreover, international expansion and cost-efficiency measures are seen as contributing elements. The firm also highlighted Shift4 Payments' strong balance sheet, with a 2.7x net leverage ratio, which is believed to provide ample capacity for both organic and inorganic investments.
Evercore ISI has increased its adjusted EBITDA forecasts for Shift4 Payments for the years 2024 and 2025 by $20 million and $50 million, respectively, reaching $680 million and $850 million. These revisions place the firm's estimates 3% and 7% above consensus for these years. The adjustments are tied to expectations of higher-than-anticipated payment volumes and an optimistic margin outlook.
The revised price target of $105 is based on a 13x multiple of the firm's 2025 estimated enterprise value to EBITDA, which remains unchanged. The adjustment reflects an increased share count. Despite the reduction in the price target, Evercore ISI continues to endorse an Outperform rating for Shift4 Payments and maintains the stock as its #4 Top Pick.
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