ACI Worldwide Inc. (NASDAQ:ACIW): a stock with growth potential in turbulent times

ACI Worldwide, Inc. (NASDAQ: ACIW) is a payment systems company headquartered in Miami, Florida. ACI was established in 1975, it develops a broad line of software focused on facilitating real-time electronic payments.

These products and services are used globally by banks, financial intermediaries such as third-party electronic payment processors, payment associations, switch interchanges, merchants, corporations, and a wide range of transaction-generating endpoints, including automated teller machines (“ATM”), merchant point of sale (“POS”) terminals, bank branches, mobile phones, tablet computers, corporations, and internet commerce sites.

More than 6,000 organizations around the world, including 1,000 of the largest financial institutions and intermediaries, as well as thousands of global merchants, rely on ACI to execute billions of transactions each day in payments and securities.

Highlights and News Updates

• On April 18th, 2023, ACI Worldwide announced, that their award-winning fraud protection services is now available as part of ACI’s Real-Time Payments Cloud for U.S. customers with partnership with Microsoft azure.

• On March 14^th, 2023, ACI Worldwide partnered with financial technology company RedAbierta to power real-time payments in Honduras.

• On March 9^th, 2023, ACI Worldwide partnered with Philippines’ Security Bank Corporation to transform the bank’s real-time payments platform in the country.

• On February 1^st, 2023, ACI Worldwide announced, the expansion of the global reach of its industry-leading, real-time payments software solutions. ACI now powers 25 domestic and pan-regional real-time schemes across six continents — including nine central infrastructures — providing solutions to central banks, participant banks, fintech’s and other payment service providers.

• On January 17^th, 2023, ACI Worldwide announced, the launch of ACI Instant Pay, a new real-time payments solution that enables merchants in the U.S. to accept online, mobile, and in-store payments instantly.

• On December 8^th, 2022, ACI Worldwide announced, plans to launch a wide range of new real-time payment services as the scheme celebrates its first anniversary.

• On November 29th, 2022, ACI Worldwide and Vendo Service partnered to enable merchants to offer cryptocurrency payment globally.

Key Data

Fourth Quarter 2022 Highlights

• In Q4 2022, revenue was US $452 million, down from US $467 million in Q4 2021.

• Net income was US $90 million, versus US $109 million in Q4 2021.

• Adjusted EBITDA in Q4 2022 was US $194 million, versus US $205 million in Q4 2021.

• Full-year 2022 total revenue was US $1.422 billion, up by 4% from 2021.

• Net income of US $142 million increased 11% from US $128 million in 2021. 

• Total adjusted EBITDA in 2022 was US $373 million compared to US $384 million in 2021.

• Consolidated Annual Recurring Revenue (ARR) bookings for 2022 grew 35% over 2021.

Financials

Revenue of the company has grown at CAGR of 7.08% and profit  has grown at CAGR of 15.52%. Even during covid-19 pandemic, when majority of the companies were struggling, ACI managed to grow the revenue and successfully booked profit.

EPS too is in uptrend due to continuous growing profit. EPS has grown at CAGR of 16.01%.

As of December 31st, 2022, current portion of the long-term debt was US $65.512 Mn which it will pay in FY 2023 and outstanding long-term debt was US $1.024 Mn, totalling to  US $1.09 Bn. Company has asset worth US $3.210 Bn and retained earnings of US $1.274 Bn. For now, debt does not look troubling for the company as it can be paid off efficiently.

Quarterly revenue and profit have grown too. The have booked good amount profit in fourth quarter.

Forecast

Right now, the company is trading at US $24.19 with 1-year projected target of around US $39 and a low estimation of US $20; average price target is US $35.74.

Technical Analysis

• The stock has corrected more than 40% since 2021 and now, it is expected to go up.

• Right now, RSI (46.79) indicator is below 50 which show it is good time to invest in this stock as its undervalued.

• The stock has potential to bounce back up to 51% from current market price. Analysts are bullish on this stock.

Indicators Summary – Buy

• The price action analysis of the stock is indicating a positive uptrend in the stock. Market sentiments are bullish.

• The stock is taking support above 100-day EMA.

• Momentum (-0.26) indicator is giving bullish signal.

• Awesome (0.28) indicator is giving bullish signal.

Risk factors

• World is changing rapidly and technology is evolving. ACI will have to invest huge amounts in research and development for the technology enhancement and upgradation to keep up with the competitors or end up losing market share.

• Security theft, fraudulent activities, and scams are increasing day by day and according to the report of ACI, scams are expected to double till 2026. To prevent these issues, they must need to spent good amount of time and resources on security enhancements.

Stock Recommendation

With market capitalization of US $2.772 Bn we recommend to add this stock in your portfolio because of its business model, change in global environment, and its increasing global reach. Due to covid-19 pandemic people all around the world are giving more importance cashless payments which has led to increase in online transactions all around the world which has benefited ACI, as is clearly visible in their financials.

They have presence all around world in Indonesia, India, Australia, South Africa, Canada, UK, and many other countries. ACI is trying to expand in other countries too which will impact their earning positively. They are also helping and partnering with vendors, financial institute, banks and government agencies to expand. Their annual recurring revenue is also growing as it grew 35% in FY2022 which shows the company has huge customer base who are the repeated buyers of its services.

MarketFacts gives a “Buy” rating on the stock at the closing price of US $24.19 as of April 25^th, 2023.

CMP (USD)  (April 25, 2023)	US $ 24.19
Target Price	US $ 31.50
Recommendation	Buy