The last six months haven’t been particularly kind to Euronet Worldwide (EEFT) shares, as the stock has declined about 20% since my last update. It likely won’t mitigate the disappointment for shareholders all that much, but it’s not just Euronet seeing weakness, as Fidelity National (FIS), Global Payments (GPN) and Western Union (WU) have all been weak, as resurgent COVID-19 infection rates threaten the recovery in leisure and travel-related payments volumes.
Competition from new payment tech/fintech entrants always is going to be a risk for Euronet, but I like what management is building. A slower recovery in travel, which hamstrings high-margin cross-border ATM revenue, is a near-term threat, but I do believe that travel will normalize eventually. In the meantime, the company has successfully repositioned the epay business for long-term growth, continued to grow the money transfer business, and started positioning its core REN/REV payment software platforms as “fintech in a box” solutions for a broad assortment of banking and business customers.
If my assumptions are right and Euronet can generate long-term revenue growth in the mid-to-high single-digits, with mid-teens FCF margins supporting high single-digit FCF growth, the shares look meaningfully undervalued today.
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COVID-19 Pressuring Euronet, But The Future Is Bright For This Stock
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