Worldpay is a quality business, and just one month ago the stock was pricing in very close to our worst case scenario, which we doubt will turn out to be true. Even today, at 16.4x 2020 PE we think the stock is priced for a fade rate that will likely be too conservative.
In brief, Worldpay is quality, 8-10% revenue growth at a reasonable price
Core underlying cash to card tailwind of 3-4% revenue growth.
40% of the business is growing at almost 20%, with higher margins.
We spent a long time worrying / looking into the risk from Stripe, Adyen, Braintree and came to the conclusion that despite the high growth of these companies Worldpay can continue to grow revenues at 6% to 10%.
Potential Upside: $105 (+24%): 8-10% revenue growth, with high incremental margins, potentially sustainable for 3+ years.
Sensible Downside: $68 (-20%): Based on harsh fade rate to 2.5% growth.
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