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Global Payments' (GPN) Acquisitions Place it Well for Growth

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Global Payments Inc. (GPN - Free Report) is executing well its acquisition strategy for enhancing its software portfolio, in order to boost digital payment capabilities.

Recently, the company expanded its own open software portfolio with the acquisitions of AdvancedMD and SICOM, in an effort to successfully deploy capital to develop its technology capabilities in attractive vertical markets.

The acquisition of SICOM complements the company’s existing Xenial platform, with the combined company providing end-to-end offerings for small, medium-sized and enterprise-level restaurant customers globally, one of the largest vertical markets served by the company.

This acquisition solidly positions Global Payments to deliver a complete solution to the entire restaurant vertical. Also, the buyout uniquely positions the company as a one-stop shop for software and payment services for customers in this $4-billion target addressable market or TAM.

The company’s Xenial platform already caters to 25,000 quick-service restaurants in the United States. The SICOM deal adds a worldwide footprint to its QSR markets, with enterprise solutions that double the restaurant base of the company across more than 60 countries in the Americas, Europe and Asia. The acquisition of SICOM also provides entry into the food service management vertical market, a $2.5-billion TAM.

In early September, the company closed the acquisition of AdvancedMD (AMD), a provider of cloud-based solutions for small- to medium-sized physician offices in the United States. This deal provides direct entry into a new $9-billion target addressable market, which remains highly fragmented, for small- and medium-sized physician healthcare software. AMD, with its leadership in this market, provides Global Payments the best opportunity to grab market share.

The company’s acquisition of ACTIVE, completed last year, is also leading to the generation of synergies. Global Payments achieved record bookings in the last reported quarter, as it continues to acquire new logos and expand business with existing strategic partners. Including ACTIVE, the company has successfully executed three software acquisitions over the past one and a half years.

The company’s acquisition strategy remains focused on capturing vertical markets, which fits with its philosophy to gain market share by widening the competitive gap with legacy competitors.

Though the stock has gained only 1.4% in a year’s time, underperforming the industry’s growth of 13%, we believe that its strong business model and well execution of growth plans will hold the stock in good stead in the coming quarters.

 

 

Global Payments currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Envestnet, Inc. (ENV - Free Report) , Green Dot Corporation (GDOT - Free Report) and Cardtronics PLC (CATM - Free Report) . While both Envestnet and Green Dot carry a Zacks Rank #1 (Strong Buy), Cardtronics holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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