Portfolio: Zacks Deep Value Proxy

Global Payments (GPN) was the world’s fourth-largest merchant acquirer, processing ~$2 trillion in annual payment volume across 4.6 million merchant locations globally. And now with the Worldpay acquisition closed, the combined firm is now the third largest by transaction volume in the world, and is also now a pure-play merchant acquirer. The company earns revenue through a combination of transaction-based fees (~2–3% of card volume) and recurring software subscriptions sold to merchants in vertical markets (restaurants, healthcare, education, gaming).​

We think the downward pressures the stock has endured due to intense competition in the payments space from Stripe and Adyen, overall SaaS selloff due to perceived threats from AI, and the company’s own debtload as a result of this mega deal is now nearing completion, with shares trading at an unthinkable 5x forward P/E despite compound EPS growth of 10-12% over the next three years. The combined company is expected to create cost synergies of $600 million while also being a complementary combination since GPN can cross-sell its Genius POS system to Worldpay’s small & medium business (SMB) customer base, while Worldpay’s capabilities will be cross sold to GPN’s existing clients. This is incredibly bullish for future earnings growth, in our view, and today’s valuation has set the bar extremely low to beat for what is now the world’s third largest merchant acquirer.