Shift4 Payments is the IBD Stock of the Day as the digital payment processor outperforms peers in the Finance-Credit Card/Payment Processing group. The relative strength line of FOUR stock is near 52-week highs amid stock market volatility and the banking crisis.
On Tuesday, Shift4 stock rose 2.8% to close at 69. Shares were up another 1.1% premarket Wednesday to 69.75. FOUR stock is not yet actionable.
Shift4 stock has pulled back from an intraday high of 73.62 set on March 6. The stock had rallied on fourth-quarter earnings and a strong 2023 outlook for earnings before interest, taxes, depreciation and amortization.
Amid the banking crisis, Shift4 seems well-positioned, Bank of America analyst Jason Kupferberg said in a recent note to clients.
"FOUR has not experienced any impact from the recent crisis related to regional banks, as consumer spending trends have remained steady," he said.
FOUR stock found support at its 21-day exponential moving average. Investor's Business Daily research has found that with the biggest stock market winners, they tend to find support at the 21-day after a breakout for at least several weeks.
A move above last Thursday's high of 70.84 would offer a new entry point.
Up 21% So Far This Year
Thus far in 2023, shares have gained 21%. The Finance-Credit Card/Payment Processing group has advanced 6%. It's ranked No. 75 out of 197 industry groups tracked.
Amid the strong relative strength line of FOUR stock, investors should monitor whether Shift4 forms a new base. That could happen by the end of next week.
Also, shares trade just above their 50-day moving average.
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.
FOUR Stock: Rivals Include Clover, Square, Toast
At the end of 2022, Shift4 launched its next-generation Sky Tab restaurant payment system. Sky Tab competes with Toast, Block's Square business and Fiserv's Clover.
Shift4 charges restaurants $29.99 per month and offers point-of-sale devices free of charge to merchants.
"We are impressed by SkyTab POS, which we expect will drive share gains for FOUR given superior feature functionality and pricing," Evercore ISI analyst David Togut said in a note to clients.
Shift4 generates the majority of its revenue from applying a processing fee charged as a percentage of end-to-end payment volume, he noted.
At Susquehanna, analyst James Friedman said in his note to clients: "One competitive advantage of Skytab, which could lead to further market share gains, is that the system caters best to more complex, table service-type restaurants versus low end coffee shop and self-serve places and quick service environments like fast food."
Friedman added: "FOUR appears to be onto something with pushing a subscription-based approach."
Aside from the hotel and restaurant industries, Shift4 has expanded into sports stadiums, airlines and charities, as well as food and beverage companies.
"Among its newer verticals, FOUR views sports and entertainment as especially compelling given its competitive positioning," added BofA's Kupferberg.
FOUR Stock: International Expansion
In addition, 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 e-commerce platform with banking licenses in Europe, Japan and Hong Kong.
"For 2023, international expansion remains FOUR's top capital allocation priority, and likely will be a driver in achieving mid-term target," UBS analyst Rayna Kumar said in her note to clients. "Management expects the Finaro acquisition, a key part of Shift4's international expansion strategy, to close in the second quarter of 2023."
Shift4 recently expanded its relationship with PayPal to offer its payment method as an option at online checkout.
Also, Premier Productions, one of the largest live-event promoters, selected Shift4 to process online payments for all tickets.
Founder's Voting Control Power
Shift4's biggest wild card for 2023 is its partnerships with Elon Musk-owned companies. Musk's SpaceX, including consumer satellite broadband firm Starlink, is a new customer. Starlink operates in 20 countries.
Shift4 launched its initial public offering in June 2020 with shares priced at 23. FOUR stock holds a perfect IBD Composite Rating of 99, according to IBD Stock Checkup.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Shift4 stock has an Accumulation/Distribution Rating of B. 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.
Chief Executive Jared Isaacman controls more than 80% of Shift4's voting power and 35% of the company.
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