On Monday, CFRA raised its price target on shares of Corpay (NYSE: CPAY) to $385 from the previous target of $325, while maintaining a Buy rating on the stock. The new price target implies a valuation of 17.2 times the firm's 2025 earnings per share (EPS) forecast, aligning with the risk premium of Corpay's industry counterparts.
The firm's 2024 EPS estimate for Corpay remains at $19.06, with the 2025 projection at $22.36. The analyst highlighted Corpay's diversified business model and high-margin operations as key factors supporting the company's investment appeal.
The firm's strategic focus on Vehicle Payments, which accounted for 53% of 2023 revenue, and Corporate Payments, contributing 26%, is expected to drive significant growth.
Corpay's growth outlook appears robust, with projections of a 7% increase in 2024 and an 11% rise in 2025. The company's revenue model is predominantly subscription-based, making up 80% of total revenue, contributing to its position as one of the most profitable in the industry. This model has led to an impressive last-12-month EBITDA margin of 53%, considerably higher than the peer group average of 35%.
The firm anticipates Corpay will see margin expansion of nearly 100 basis points in 2024, building on the already strong performance of a 53% EBITDA margin in 2023. The company's positive trajectory is supported by its involvement in corporate payments, the electric vehicle (EV) transition, and plans for international expansion.
In other recent news, Corpay has reported exceeding Q2 earnings and revenue estimates, with an adjusted earnings per share of $4.55 and revenue reported at $975.7 million.
However, the company's Q3 guidance fell below analysts' expectations, projecting an adjusted EPS of $4.90-$5.00 and revenue between $1.015-1.035 billion. In addition, Corpay has completed the acquisition of Paymerang, a move anticipated to generate an additional $25-35 million in revenue for the remainder of 2024.
Baird has maintained its Outperform rating on Corpay, citing the company's solid performance and favorable macroeconomic conditions. Similarly, BMO Capital Markets has sustained its positive outlook on Corpay, maintaining a $350 target and expecting growth into 2024.
However, Wolfe Research has adjusted its rating on Corpay stock from Underperform to Peer Perform, recognizing the company's long-term growth prospects while noting potential challenges, including increased competition in the B2B payment sector.
InvestingPro Insights
Recent data from InvestingPro reinforces CFRA's bullish stance on Corpay (NYSE: CPAY). The company's market capitalization stands at $23.0 billion, reflecting its significant presence in the payment solutions sector. Corpay's P/E ratio of 23.58 suggests that investors are willing to pay a premium for its shares, likely due to its strong growth prospects and profitability.
InvestingPro data shows that Corpay's revenue for the last twelve months as of Q2 2024 reached $3.82 billion, with a solid revenue growth of 5.32% over the same period. This aligns with CFRA's projection of continued growth in the coming years. The company's impressive gross profit margin of 78.36% and operating income margin of 44.5% underscore its operational efficiency and support the analyst's view of Corpay as one of the most profitable companies in its industry.
InvestingPro Tips highlight Corpay's strong performance, noting that the company has demonstrated consistent earnings per share growth and maintains high liquidity to cover short-term obligations. These factors contribute to the company's financial stability and growth potential, supporting CFRA's increased price target.
For investors seeking a deeper understanding of Corpay's financial health and growth prospects, InvestingPro offers additional tips and insights. Currently, there are 13 more tips available for Corpay on the InvestingPro platform, providing a comprehensive analysis for those looking to make informed investment decisions.
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