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Roth/MKM maintains Buy rating on CPI Card stock amid growth optimism

EditorAhmed Abdulazez Abdulkadir
Published 06/12/2024, 01:34 AM
PMTS
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On Tuesday, Roth/MKM sustained its Buy rating on CPI Card Group (NASDAQ:PMTS (TSX:PMTS)), with a steadfast price target of $40.00. Following a series of investor meetings with CPI Card Group's CEO John Lowe and CFO Jeffrey Hachstadt, the firm expressed a reinforced positive outlook on the company's prospects. Management confirmed their expectation that the current excess card inventory would be resolved by 2024, forecasting an uptick in customer purchasing patterns.

The company's leadership, including SVP IR Mike Salop, highlighted the robust growth in card issuance, which continues at a healthy rate of approximately 9% at the market level. This expansion is partly attributed to the rise of fintech companies and gig economy employers, which are increasingly adopting card-based transactions. Roth/MKM's endorsement comes with an encouragement to invest in CPI Card Group shares at the present value.

CPI Card Group's management team has conveyed confidence in the company's trajectory, anticipating a clearance of the surplus inventory that has been affecting the business. They anticipate that this will pave the way for stronger customer purchasing trends in the near future. The firm's optimism is bolstered by the growing number of card issuers in the industry, a trend that is expected to contribute positively to CPI Card Group's performance.

Despite the challenges posed by the inventory overhang, Roth/MKM's analysis suggests that CPI Card Group is positioned for a rebound as the situation improves. The firm's maintained rating and price target reflect a belief in the company's ability to navigate current market conditions and capitalize on the underlying growth trends in card issuance.

In other recent news, CPI Card Group reported a 7% decrease in net sales for the first quarter of 2024. Despite this, the company experienced sequential growth in net sales, net income, and adjusted EBITDA. This decline was offset by significant growth in the prepaid business and card services. The company is also expanding into digital solutions, supported by a new contract that promises increased sales through 2029.

CPI Card Group remains optimistic about the US card market and maintains a positive full-year outlook for net sales and adjusted EBITDA, with slight increases expected. However, the free cash flow forecast has been revised due to initial incentives tied to the new contract. The company also has a robust cash reserve of $17.1 million and has made no borrowings against their $75 million ABL revolver, indicating financial stability.

These are recent developments that highlight the company's strategic approach to overcoming current sales decline and its commitment to long-term growth.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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