Morgan Stanley Just Turned Bullish On This Payments Processor Ahead Of Q2 Earnings – Sees An ‘Increasingly Asymmetric' Upside Setup

• The firm said near-term risks for the company are largely reflected in the shares.
• Fiscal AI has polled for Q2 consensus estimates of $3.45 in earnings per share and $3.16 billion in revenue.
• Koyfin data shows that 20 out of 34 analysts covering the stock rate it a ‘hold,’ 12 rate it a ‘Buy,’ and 2 ‘Sell’ or lower.

Morgan Stanley on Monday upgraded payments processing solutions company Global Payments (GPN) to ‘Overweight’ from ‘Equal Weight,’ calling the shares “fundamentally too cheap” ahead of its second-quarter earnings next month. 

At the time of writing, GPN stock was up nearly 4% in premarket trading.

Morgan Stanley’s Takeaway

The firm said the setup for the stock heading into earnings has become “increasingly asymmetric to the upside,” according to a report from Investing.com. Morgan Stanley said its channel checks revealed that the company’s flagship products, Genius and Worldpay, are becoming more constructive among their respective small- and medium-sized business and enterprise customers.

The firm said improved competitive positioning for the products would support a durable mid-single-digit growth for the company, and investors appear ready to "re-engage with a stock where the bar is low, and a potentially broadening market could bring deep-value processors back."

Morgan Stanley Thinks GPN Shares Are Cheap

The firm noted that GPN shares trade at a price-to-earnings ratio of 31, implying the company trades below its intrinsic value and is therefore cheap. Near-term risks for the company include execution, Worldpay integration, and Middle East travel, but Morgan Stanley believes those concerns are well understood and largely reflected in the shares.

GPN has a new price target of $100, up from $65, implying more than 28% upside potential as of the stock’s previous close on Friday. Koyfin data shows that 20 out of 34 analysts covering the stock rate it a ‘hold,’ 12 rate it a ‘Buy,’ and 2 ‘Sell’ or lower.

The company is expected to report second-quarter results on August 5. Fiscal AI has polled for consensus estimates of $3.45 in earnings per share and $3.16 billion in revenue. 

On Stocktwits, retail sentiment toward the stock has remained in ‘Neutral’ territory over the past 24 hours. GPN shares have declined more than 6% in the last 12 months.

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