Euronet Stock: Price Weakness Presents Contrarian Opportunity

Demand for Digital Payments Likely to Drive Up Price of EEFT Stock

Investors recently sold off technology and growth stocks after the Federal Reserve hiked its interest rate in an attempt to stem inflation. Rising interest rates are bad for stockholders, but for investors who are willing to wait out the bear market, I believe there are opportunities to accumulate stocks on price weakness.

A major concern with the rise in interest rates globally is the negative impact it will have on demand and the overall economy. While it looks like there will be a recession in the U.S. and Europe, the economic situation will eventually improve.

An interesting play on the global money transfer and digital payment processing sector is Euronet Worldwide, Inc. (NASDAQ:EEFT). Euronet stock could be a solid long-term investment.

Euronet is a global financial technology company that provides secure electronic financial transaction processing. The company’s solutions are found in automated teller machines (ATMs), point-of-sale (POS) terminals, and digital applications. They’re used by financial institutions, retailers, and consumers. (Source: “Overview,” Euronet Worldwide, Inc., last accessed October 4, 2022.)

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EEFT stock fell to a 52-week low of $79.42 on September 23, down by 47% from its range high (set in February) and down by 54% from its record high of $171.25, (set in July 2019).

Chart courtesy of StockCharts.com

I view Euronet Worldwide, Inc.’s current share-price weakness as an opportunity. My thinking is that, when the global economy recovers, Euronet stock should experience significant price appreciation.

Euronet Worldwide, Inc. Has High Revenue Growth & Attractive Valuation

Euronet Worldwide, Inc. reported revenue growth in three of the last four years. The company’s revenues reached a record $3.0 billion in 2021, up by 20.7% compared to 2020 and above their pre-pandemic level.

While it’s clear a recession will hurt Euronet, analysts seem optimistic, calling for revenue growth of 13.3% to $3.4 billion in 2022 and 10.9% to $3.8 billion in 2023. (Source: “Euronet Worldwide, Inc (EEFT),” Yahoo! Finance, last accessed October 4, 2022.)

Fiscal YearRevenues (Billions)Growth
2017$2.3N/A
2018$2.512.6%
2019$2.88.4%
2020$2.5-9.7%
2021$3.020.7%

(Source: “Euronet Worldwide Inc.” MarketWatch, last accessed October 4, 2022.)

Considering its share-price deterioration, Euronet Worldwide, Inc. trades just above one times its consensus 2023 revenue estimate. Even if the company’s revenues fall short, I feel that the drop in EEFT stock’s price makes up for it.

Euronet Worldwide, Inc. has delivered steady earnings before interest, taxes, depreciation, and amortization (EBITDA); generally accepted accounting principles (GAAP) earnings; and adjusted profits. The company has also been churning out positive free cash flow.

Analysts’ consensus estimate is for Euronet to report an adjusted $6.41 per diluted share in 2022 and $8.41 per diluted share in 2023. The estimates imply that Euronet Worldwide, Inc. trades at an attractive 9.4 times its consensus 2023 revenue estimate. (Source: Yahoo! Finance, op. cit.)

Analyst Take

Institutional investors and insiders are big buyers of Euronet stock. About 473 institutions hold a 96.7% stake in the outstanding shares of Euronet Worldwide, Inc. (Source: Yahoo! Finance, op. cit.)

My view is that the company will benefit from the economic turnaround down the road, given its strong presence in the cash, money transfer, and payment processing space.

The price deterioration allows some room for lower revenues and earnings that could emerge from a recession. Longer-term, EEFT stock will likely deliver above-average returns.