Shift4 Payments is the IBD Stock of the Day as the financial technology company forges a new entry point. FOUR stock has gained 18% in 2023 amid intensified competition in the restaurant sector while the company expands internationally and into new markets.
On the stock market today, Shift4 stock slipped 2.4% to close at 64.71. FOUR stock has formed a 68.17 handle buy point in a long, deep consolidation. The handle base formed after Shift4 stock rallied on third-quarter earnings.
Allentown, Pa.-based digital payments processor Shift4 gets most of its revenue from customers in the hotel and restaurant industries as well as casinos. Shift4 has expanded into sports stadiums, airlines and charities, as well as food and beverage companies.
In the National Football League, new customers include the Baltimore Ravens and Miami Dolphins.
"FOUR continues to take share in its end markets with 50% of growth coming from net new wins," Goldman Sachs analyst Will Nance said in a recent note to clients.
Meanwhile, Shift4 stock has climbed above its 200-day moving average, a bullish signal. In addition, FOUR stock holds an IBD Composite Rating of 97, according to IBD Stock Checkup.
FOUR Stock: Technical Ratings
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. Also, the best growth stocks have a Composite Rating of 90 or better.
Shift4 stock owns an Accumulation/Distribution Rating of A-minus. That rating analyzes price and volume changes in a stock over the past 13 weeks of trading. Its current rating indicates more funds are buying than selling.
The rating, on a scale of A+ to E, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
Meanwhile, third-quarter adjusted profit rose 86% to 82 cents. That topped consensus estimates of 67 cents. Revenue climbed 23% to $675.4 million, missing estimates by 4%.
Shift4 CEO Controls Voting Power
But Shift4's adjusted earnings before interest, taxes, depreciation and amortization rose 46% to $125 million, topping estimates by 7%.
Also, Shift4 raised its full-year adjusted free cash flow estimate to $259 million from prior guidance of $240 million.
Further, management pointed to "large customer wins, implementations and timing of M&A" that would contribute to a strong fourth quarter.
Chief Executive Jared Isaacman controls more than 80% of Shift4's voting power and 35% of the company. In a letter to shareholders on the company's third-quarter results, he said that Shift4 is "exploring strategic opportunities and alternatives that will reduce distractions."
Shift4 went public in June 2020. Some analysts have speculated about Isaacman taking the company private.
FOUR Stock: Acquisitions Pick Up
Shift4 recently closed the $575 million acquisition of Finaro, a Pan-European e-commerce platform with banking licenses in Europe, Japan and Hong Kong.
Also, Shift4 purchased sports stadium payment processor Appetize for $100 million.
At Goldman Sachs, Nance expects upside from "increasing monetization of what Shift4 calls 'gateway' customers — those customers that use a FOUR software platform to accept payments but send volume to third party processors to process their payments. Many of these gateway customers are likely to consolidate their payment processing relationships to FOUR."
At the end of 2022, Shift4 launched its next-generation Sky Tab restaurant payment system. Sky Tab competes with Toast, Block's Square business and Fiserv's Clover.
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