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Global Payments' (GPN -5%) updated strategy and financial targets released yesterday continue to invoke a negative response today, pushing shares lower response and pushing shares toward August lows. The payment processor, which focuses more on smaller merchants relative to larger players in the industry, such as Fiserv (FI), has run into several headwinds since hitting one-year highs earlier this year. Part of the problem GPN faces is its relatively high exposure to small merchants, which are more sensitive to macroeconomic volatility compared to larger businesses. Over the past few quarters, this exposure has kept a lid on revenue growth.

With GPN already trading roughly 12% lower YTD ahead of its Investor Conference, investors likely did not have sky-high expectations. However, its outlook was still discouraging even when stacked against a relatively low bar.

• GPN projected adjusted net revenue growth of mid-single-digit growth for FY25. Based on the midpoint of the company's estimated FY24 revenue outlook of $9.17-9.30 bln, its FY25 guidance translates to roughly $9.7 bln, missing analyst expectations. Since GPN does not typically project annual revs below consensus -- not missing the mark since 2021 -- its downbeat revenue guidance came as a shock.
• Similarly, GPN's adjusted EPS growth projection of around +10% in FY25 fell short of analyst expectations when using the midpoint of the company's $11.54-11.70 outlook for FY24. This may not be as frustrating as the mild revenue growth prediction since GPN does not possess a strong track record of exceptional margin growth, targeting just 30 bps of expansion in FY24. Nevertheless, underperforming expectations will not help to change the current bearish sentiment surrounding the stock.
• Additionally, GPN outlined its 2026-2027 revenue growth framework, predicting a mid to high-single-digit percentage lift. While the high end does incorporate modest acceleration, it underscores a relatively sluggish demand landscape for the medium term, far from the double-digit gains GPN was enjoying during 2020 and 2021. On the earnings side, GPN targets low teen percentage growth, which is relatively consistent with what it has registered for the past few years.
• On the strategy front, GPN reiterated a few items, such as aligning brand identity across assets and pursuing dispositions. The company also discussed streamlining operations, an effort it has pursued for some time as it contends with a fluid macroeconomic environment. GPN did announce that it was targeting $7.5 bln in shareholder returns over the next three years, which would likely be achieved through repurchases and dividends.

GPN's strategy updates and financial goals were not very inspiring. The company is staring at gradual growth over the medium term, a development not appreciated by investors who may be growing impatient with GPN's slowing growth. Also not inducing much confidence today is that GPN's dependence on small merchants could spark downward revisions to its already soft financial forecasts if the U.S. enters a recession.