Payment processor Shift4 Payments is in a buy zone as its relative strength line hit new highs despite hitting a sell signal just a week ago. The stock is also one of the financial technology stocks to watch and on the IBD 50 growth stocks to watchlist.
Shift4 plunged after it reported earnings on Nov. 7 but then climbed on Nov. 15 to a buy point of 51.52 from a consolidation. Then it started to slide, hitting a 7% sell signal twice, once in late November and then again in early December.
Since then, however, it has come back on the strength of forecasts for higher retail holiday sales, both online and in stores. It climbed back into its buy zone on Monday and has remained there. After such a sell signal, it's also possible to draw a new handle, in this case with an alternative 54.36 buy point.
Its RS Rating is now 92, and its Composite Rating has jumped to 96.
Shift4 shares slipped 2.5% Wednesday afternoon after the Federal Reserve said it expects to hike key interest rates to 5.1% next year, higher than Wall Street is counting on. The new projections, released at the end of Wednesday's Fed meeting, were revealed along with the news everyone expected — a half-point rate hike.
U.S. holiday sales are expected to grow 4.5% in 2022, above the pre-pandemic average of 3.9% but well below the lofty rates seen in recent years, forecasts S&P Global Intelligence. Online holiday sales will grow a 7.9%, below the pre-pandemic average of 11.1%, says the market research firm.
Shift4 Stock Beats Q3 Earnings, Sales Seen Picking Up
Last month, Shift4 beat earnings estimates and narrowly missed Wall Street projections on revenue for its third quarter. Shift4 earnings rose 65% on an adjusted basis from a year earlier to 44 cents. Net revenue climbed 33% to $196.7 million.
For full-year 2022, Shift4 said it expects earnings before interest, taxes, depreciation and amortization in a range of $275 million to $280 million, up from earlier guidance of $255 million to $265 million.
"Fueling Q3 sales growth was a 53% increase in end-to-end payments volume," EvercoreISI analyst David Togut said in a note to clients. "FOUR introduced medium-term outlooks through 2024." Togut said. That included $160 billion in end-to-end volumes with at least a 50% compound annual growth rate.
The digital payment processor launched its initial public offering in June 2020 with Shift4 stock priced at 23.
Shift4 gets most of its revenue from customers in the hotel and restaurant industries as well as casinos. It has expanded into sports stadiums, airlines and charitable giving as well as food and beverage companies. Satellite broadband firm Starlink is a new customer. Tesla CEO Elon Musk has tapped Shift4 to process consumer payments worldwide.
Shift4 competes with Clover, which is owned by Fiserv, Square parent Block, Toast and others. FOUR is ranked No. 1 in IBD's Credit Card and Payment Processors industry group.
Follow Michael Molinski on Twitter @IMmolinski
