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Global Payments (GPN) Rides on Software-Driven Solutions

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Global Payments Inc. (GPN - Free Report) is poised for long-term growth on the back of its software-driven payments service, which should ride on rising global consumption and the shift of payment mode to digital. The company already reached the threshold of 60% of its business coming from technology enablement, a goal which was set in March 2018 for 2020 end and was achieved early last July. And roughly 25% of its business is now related to its e-commerce and omni-channel initiatives.

Global Payments’ partnership with Google for its merchant segment and Amazon for its issuer segment also bodes well. The pact with Google made Global Payments the preferred provider for merchant-acquiring services. Global Payments will use Google Cloud for the merchant-acquiring segment.

The deal with Google substantially advances the company’s Merchant business by driving incremental revenues and lowering operating costs. It helps both companies forge a worldwide go-to-market distribution relationship and reach a co-innovation agreement focused on transformative cloud-native technologies.

The company’s multi-year partnership with Amazon Web Services will allow both entities to provide a cloud-based issuer processing platform to financial institutions around the world. Global Payments will rely on AWS as its preferred cloud provider for issuer processing and will use a range of AWS services including storage, computing, database, security, analytics and machine learning to fulfill compliance requirements, enable new cloud-based services and enhance customer experiences for its clients and their cardholders.

Together with AWS and Google, Global Payments expects to achieve further technology efficiency and omni-channel penetration as key catalysts. These deals will transition the company’s Issuing and Merchant businesses to cloud-native technologies and expand its competitive moat. Further, these alliances will accelerate the transformation of its businesses for years to come.

The company’s acquisition of Total Systems in 2019 is also tracking well ahead of the plan. Total System provided the company with the much-needed scale and bolstered its presence in several new markets. The combination of Global Payments and TSYS lent the former unparalleled vertical market and payment software capabilities as well as e-commerce and omnichannel solutions in the fast-growing markets, globally.

Courtesy of this merger, the leading pure-play payments technology company could once again raise its estimates for annual run-rate expense synergies to at least $400 million within three years, indicating a rise from the previous estimate of $375 million. This marks the fourth-time increase in the company’s cost-synergy expectations. Additionally, its early success in leveraging its complementary products and capabilities worldwide prompted the company to lift its projection for annual run-rate synergies to $150 million, suggesting an improvement from its previous forecast of $125 million.

Global Payments proved its steadfastness in the adoption of technology to ride the wave of change sweeping across the industry. The company anticipates that the continued innovation of  services and the emergence of new vertical markets will be major drivers in bumping up its business and revenues in the future.

In six months’ time, the stock has gained 22.3% compared with its industry’s growth of 10.1%.

Other stocks in the same space, namely PayPal Holdings, Inc. (PYPL - Free Report) , EVO Payments, Inc. and Square, Inc. (SQ - Free Report) have also rallied 38.4%, 20.2% and 60.3%, respectively.

Global Payments currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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