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Shift4 Payments (FOUR) is a Zacks Rank #1 (Strong Buy) that is a provider of integrated payment processing and technology solutions. The company provides omni-channel card acceptance and processing solutions, including credit, debit, contactless card, Europay, Mastercard and Visa, QR Pay, and mobile wallets, as well as alternative payment methods.

FOUR has been underperforming most tech companies, up only 12% on the year. For the most part, the stock has been sideways since making its initial 2023 gains back in January.

The company recently posted a positive earnings report and analysts are taking estimates higher. Investors should be watching the stock for potential technical support, followed by a move higher into the end of the year.

About the Company

The company was founded in 1999 and is headquartered in Allentown, Pennsylvania.

The stock has a Zacks Style Score of “A” in Growth and Momentum, but “C” in Value. The Forward PE is 24 and the stock has a market cap of $5 billion.

FOUR employs 2,300 employees and operates in Europe, Japan, and North America.  

Q2 Earnings Beat

In early August, FOUR beat earnings expectations by 51%. This was the sixth straight EPS beat that stretches back to early 2022. Since the start of this earnings streak, the stock is up 40%.

Looking at the quarter, Q2 came in at $0.74 v the $0.51 expected. Adjusted EBITDA was $110M v the $66M last year.

Shift4 Payments raised its FY23 guidance, now seeing End-to-End payment volume at $108-114B v the $104-110B prior. This is an increase of 45-54% year over year.

Gross revenues, adjusted EBITDA, and FCF for FY23 were also taken higher.

Analyst Estimates

Analysts reacted to EPS and the guidance raise by lifting estimates across the board.   

Since earnings, estimates for the current quarter have gone from $0.66 to $0.69 or 5%. Next quarter is where it gets impressive, with estimates going from $0.65 to $0.78 over the last 7 days. This is a 20% jump, which is almost matched by a 15% jump in the current year.  

Looking at the numbers for next year, estimates have gone from $3.02 to $3.34 over the last 7 days or 11%.

Since earnings, multiple analysts have taken price targets higher for FOUR:

UBS reiterated the stock with a Buy and took its price target to $100, up from $93. 

Credit Suisse reiterated FOUR with an Outperform and raised their price target to $80 from $75.

Morgan Stanley maintained its Underweight but lifted its price target to $52 from $50.

The Technicals

The stock started the year out around the $50 level and then marched to $75, good for about a 50% move. Since April, the stock has traded in a sideways range between $60 and $70.

As FOUR drifts lower on market weakness, investors should be watching support levels for potential buys. The 200-day MA resides at $61 and would likely be a big spot for bulls. This would front-run the $60 level which has been support four times since the April lows.

If a larger market sell-off hits the stock, the $52.50 area is the 61.8% retracement drawn from November lows to April highs.

For the bulls to take charge, the price needs to get over the $67 level. This would be a move above both the 50-day and 21-day MA. That scenario would not only bring more attention to the stock, but it would also signal a potential break of the $70 resistance.

Bottom Line

While FOUR has been trading sideways during market strength, there are reasons to believe that an eventual up move could come as we close out the year.

Estimates are headed higher and if that earnings momentum continues, we should see the bulls eventually take out that resistance that has held the stock down since April.

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