Piper Jaffray Lowers Its Price Target on Global Payments (GPN)

Piper Jaffray is out with an analyst note this morning, where it reiterates its Overweight rating on shares of Global Payments Inc. GPN; it also lowered its price target on the stock from $54.00 to $48.00. The Piper Jaffray analysts said, “According to recent commentary from Visa V, Mastercard MA, and American Express AXP, we believe card spending trends were solid in April and May. In June, we believe spending trends slowed slightly, but were still relatively solid. However, recent economic data has been mixed, suggesting to us that the economy and consumer spending could soften a bit more. As a result, we are tempering our growth outlook for GPN with our fiscal '11 GAAP EPS estimate moving from $2.96 to $2.83 with FX movements accounting for about $0.05 of the reduction.” They added, “Consistent with management's history, we expect GPN's guidance to initially be conservative and then move higher as the year progresses, assuming a gradual, generally soft economic recovery. We believe our 10% EPS growth forecast for fiscal '11 is very attainable driven by 6% revenue growth, modest margin expansion (G2 platform conversion, Asia business scaling, lapping of unfavorable spending shift to larger merchants in Canada), and modest share repurchases (benefit of strong cash flow, low debt profile).” They also noted, “We view GPN as one of the higher quality franchises in our payments coverage universe given its growing global footprint, history of disciplined, accretive acquisitions, top-notch management team, rock solid balance sheet, and strong cash flow. We believe GPN's earnings power is relatively resilient to an economic slowdown given the recurring nature of its revenue, global presence, and the ongoing secular shift from cash/check to card-based payments.”