Shift4 Payments is the IBD Stock of the Day as shares in the digital payment processor consolidate heading into 2023. Meanwhile FOUR stock investors mull catalysts and risks.
Technical ratings for FOUR stock are strong. But shares have retreated nearly 9% in 2022 following some volatility over the company's third-quarter earnings. The stock climbed 2% Friday to close at 54.06 on the stock market today.
Investors should monitor whether Shift4 stock forms a new base. If Shift4's 50-day moving average catches up to its trading point would be a bullish development.
Allentown, Pa.-based Shift4 gets most of its revenue from customers in the hotel and restaurant industries as well as casinos. One risk is that a possible U.S. recession would likely impact those industries.
On the other hand, Shift4 has been expanding into Europe through acquisitions. In September, Shift4 acquired Swiss company Online Payments Group for $125.9 million.
To help drive international expansion, Shift4 in early 2022 announced the acquisition of Finaro for $575 million. Finaro is a Pan-European cross-border e-commerce platform with banking licenses in Europe, Japan and Hong Kong.
FOUR Stock: Musk Wild Card
The biggest 2023 wild card is Shift4's partnerships with Elon Musk-owned companies. Musk's SpaceX, including consumer satellite broadband firm Starlink, is a new customer. Starlink operates in 20 countries.
Jared Isaacman, Shift4 founder and chief executive, has himself gone on a SpaceX mission and funded three more, noted a recent Susquehanna Financial report. Shift4 also has processing contracts with Musk's Boring Company.
The relationship has led some analysts to ponder whether there is potential upside for Shift4 from Musk's controversial purchase of social media platform Twitter.
Musk has discussed options for adding payments and financial services capabilities to Twitter, noted Susquehanna analyst James Friedman in a report.
"Susquehanna Financial Group sees Twitter's payment venture as a potential opportunity for FOUR," Friedman said in a recent note to clients.
"Should merchants on Twitter be enabled to accept payments via Twitter, SFG sees FOUR as a likely candidate to receive the processing volume," he said.
Tesla stock has been hit by Musk's Twitter purchase. TSLA stock has plunged 64% in 2022.
Rivals Include Clover, Square, Toast
The digital payment processor launched its initial public offering in June 2020 with FOUR stock priced at 23.
Shift4 shares tumbled on the company's third-quarter earnings report and outlook in early November.
For the quarter ending Sept. 30, Shift4 earnings rose 65% on an adjusted basis from a year earlier to 44 cents. Net revenue climbed 33% to $196.7 million.
Analysts estimated earnings of 43 cents a share on revenue of $193.1 million, according to FactSet.
Shift4 competes with Clover, owned by Fiserv, as well as Square, owned by Block and Toast, among others.
Aside from the hotel and restaurant industries, Shift4 has expanded into sports stadiums, airlines and charitable giving as well as food and beverage companies.
Shift4 stock holds a Relative Strength Rating of 89 out of a best-possible 99, according to IBD Stock Checkup. The best stocks tend to have an 80 or better RS Rating.
FOUR Stock: Isaacman Voting Power
In addition, Shift4 stock has an Accumulation/Distribution Rating of A-plus. The rating analyzes price and volume changes in a stock over the past 13 weeks of trading. The rating, on an A+ to E scale, measures institutional buying and selling in a stock. A+ signifies heavy institutional buying; E means heavy selling. Think of the C grade as neutral.
One key part of Shift4's strategy involves "gateway" services. Gateway software connects a merchant's business operations with Shift4's payment platform.
Shift4 aims to convert its existing gateway-only clients to end-to-end payment processing clients.
Gateway processing accounts for 10% of Shift4's revenue. Overall, the company garners 70% of its revenue from end-to-end payment processing and the rest from subscription software.
CEO Isaacman controls more than 80% of Shift4's voting power and 35% of the company.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
