Verizon Communications Inc.

VZ Details

Verizon Communications Inc. (NYSE: VZ) is a communication, information, and entertainment company that manufactures and distributes products and services. It has two operating segments: 1) Verizon Consumer Group, which provides cellular and landline communications services to individual customers, and 2) Verizon Business Group, which provides wireless services such as data, video, and conferencing, corporate networking solutions, security and managed network services, local and long-distance phone services, and others to business and government customers and wireline carriers.

Latest News:

• Recent Partnership: On March 22, 2022, VZ stated that Verizon Connect Reveal, a comprehensive fleet management software platform, had been completely moved to Amazon Web Services, Inc. (AWS). Verizon Connect, which is now entirely on AWS, uses the AWS multiple Availability Zone (AZ) architecture for secure, scalable, and dependable solutions and support Verizon Connect's continued expansion.

FY21 Results:

• Slight Growth in Topline: The company reported YoY growth of 4.15% in total operating revenues to USD 133.61 billion in FY21 (ended December 31, 2021) from USD 128.29 billion in FY20.
• Expansion of Net Income: The company's net income increased to USD 22.62 billion in FY21 from USD 18.35 billion in FY20.
• Cash and Debt Position: As of December 31, 2021, the company had cash and cash equivalents of USD 2.92 billion and total debt of USD 150.87 billion.

Risks:

• Vendor Concentration Risk: Only a few manufacturers and providers can meet VZ's essential equipment criteria. Furthermore, the chipset used in the production of its smartphone and other devices comes from a single vendor. As a result, any contract breach by these third parties could jeopardize the company's operations.

Outlook:

FY22 Guidance (Q42021 Earnings Presentation, January 25, 2022) 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks

Stock Recommendation:

VZ's share price has fallen 9.53% in the past nine months and is currently leaning towards the lower-band of its 52-week range of USD 49.69 to USD 59.85. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 60.26.

Considering the correction in the stock price in the past nine months, encouraging outlook, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 51.00, down 0.20% as of March 22, 2022.

Three-Year Technical Price Chart (as of March 22, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.  

Global Payments Inc.

GPN Details

Global Payments Inc. (NYSE: GPN) is a global payments technology firm that serves over 4.0 million merchant locations and 1,350 financial institutions in over 170 countries spanning North America, Europe, Asia-Pacific, and Latin America. Its services provide a wide range of solutions that help customers run their businesses more efficiently through several channels worldwide.

FY21 Results:

• Boost in Topline: The company reported a 14.82% increase in revenue to USD 8.52 billion in FY21 (ended December 31, 2021) compared to USD 7.42 billion in FY20, attributable to higher transaction volumes and increased use of digital payment solutions.
• Progress in Net Income: GPN's FY21 net income was USD 987.86 million, higher than USD 605.10 million reported in FY20.
• Cash and Debt Position: As of December 31, 2021, the company had cash & cash equivalents of USD 1.98 billion and total debt (including settlement lines of credit) of USD 11.98 billion.
• Dividend Declaration: On January 27, 2022, it also announced a dividend of USD 0.25 per share, payable on March 25, 2022, to shareholders of record on March 11, 2022.

Key Risks:

• Chargeback losses Risk: When merchants refuse or cannot reimburse GPN for chargebacks resolved in its customers' favor, GPN suffers chargeback losses. As a result, any increase in chargebacks that the company's merchants fail to pay could harm the company's finances and operations.
• Reliance on Financial institutions for settlements: It enlists the help of several financial institutions to provide clearing services to aid its settlement efforts. GPN may not provide processing services to its clients if such financial institutions cease to offer clearing services, significantly impacting its financial stability.

Outlook:

• Revenue Estimates: GPN expects adjusted net revenues to be in the range of USD 8.42-8.50 billion in FY22, up 9-10% year over year.
• EPS Estimates: It also expects adjusted earnings per share (EPS) to be around USD 9.45-9.67 in FY22, representing a 16-19% YoY increase. This forecast assumes that the global recovery from the pandemic will continue into 2022.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

GPN's share price has fallen 29.25% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 116.75 to USD 220.81. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 170.00.

Considering the significant correction in stock price, strong profitability margins, decent leverage, robust cash-flows, consistent dividend yield, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 136.95, up 1.90% as of March 22, 2022.

Three-Year Technical Price Chart (as of March 22, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.