Wednesday's IBD 50 Stocks To Watch pick is Shift4 Payments, which surged this week, making it one of the top stocks to buy and watch in the struggling stock market uptrend. FOUR stock rallied 7.8% midday Wednesday, hitting a 52-week high.
Digital payments processor Shift4 gets most of its revenue from customers in the hotel and restaurant industries as well as casinos. Aside from the hotel and restaurant industries, Shift4 has expanded into sports stadiums, airlines and charitable giving as well as food and beverage companies.
On Tuesday, Shift4 reported January-quarter earnings and revenue that topped estimates, and revenue guidance also came in above Wall Street's targets. Shift4 earnings for its fiscal fourth quarter jumped 480% from a year earlier to an adjusted 47 cents per share on sales of $199.4 million, up 36% vs. the year-ago period.
In response, FOUR stock soared more than 13%.
Shift4's IBD Stock Ratings
This payments stock to buy and watch has a middling 80 out of a best-possible 99 Earnings Per Share Rating, according to IBD Stock Checkup. The EPS Rating takes into account the growth and stability of a company's earnings over the past three years, with extra weighting put on the two most recent quarters.
For Shift4, the company turned profitable only two years ago, so it doesn't have a particularly long-term track record. That negatively impacts the EPS Rating. But after 223% EPS growth in 2022, annual earnings are expected to grow another 47% in 2023 and 42% in 2024, per FactSet estimates.
As for the SMR Rating — which looks at sales, profit margins and return on equity — Shift4 has a "B" rating. In the latest year, Shift4 Payments has a mediocre 6% pretax margin, but a strong 38% return on equity. And over the last three quarters, Shift4 has grown its sales by an average 34%.
Showing a strong 96 out of 99 IBD Composite Rating, Shift4 is one of the top stocks to buy and watch, with a solid fundamental track record. That's especially true over the shorter term, with high-growth prospects looking forward.
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Stocks To Buy And Watch: FOUR Retakes Key Level
Shift4 shares rallied nearly 8% Wednesday, adding to Tuesday's earnings-fueled gains and hitting a new 52-week high. FOUR stock's huge surge Tuesday was a buying opportunity for aggressive investors, as the stock decisively recaptured its 10-week moving average in huge volume, according to IBD MarketSmith chart analysis.
With the stock more than 10% above its 10-week line, currently priced around 61.49, it is already extended and out of buy range. Still, the stock's exemplary strength this week makes the payments leader one of the top stocks to watch.
Finally, the stock's relative strength line hit a new high this week, which is a strong signal during a struggling stock market rally.
Other IBD 50 Stocks To Buy And Watch
These are three recent IBD 50 Stocks To Watch picks.
| Company | Symbol | Buy point | Type of base |
|---|---|---|---|
| HubSpot | 399.65 | Cup with handle | |
| Monolithic Power Systems | 530.75 | Cup with handle | |
| Super Micro Computer | 92.90 | Double bottom |
Source: IBD Data As Of Feb. 28, 2023
Follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on top stocks to buy and watch and the stock market.
