We recently published a list of the 8 Best Long Term Tech Stocks To Invest In Now. In this article, we are going to take a look at where Global Payments Inc. (NYSE:GPN) stands against the other best long term tech stocks to invest in.
The technology sector came to the market’s rescue in 2023 after the disastrous macroeconomic conditions of 2022. Investments in advanced technologies like generative AI continue to show strong potential for future business growth.
According to CNBC’s Q3 CFO Council survey, 48% of the CFOs said that the tech industry’s growth will outperform all other sectors over the next six months. Moreover, in a September 23 interview with CNBC, Investment Management Partner at Callan Family Office, RaeAnn Mitrione highlighted that the tech sector has been a major beneficiary of the recent Fed rate cut. Lower interest rates are favorable for tech companies, which often thrive in such environments.
The ongoing AI theme has also been a key driver of tech’s strong performance. Additionally, she mentioned that mega-cap tech stocks were previously seen as a safe haven during economic uncertainty, but as the rate environment shifts, the focus may broaden to include smaller, more economically sensitive sectors. Nonetheless, tech’s strong momentum, fueled by AI, is likely to persist for some time.
Optimism in Global Tech Spending for 2024
According to Deloitte’s 2024 technology industry outlook, global tech spending slowed due to high interest rates, economic concerns, and geopolitical issues in 2023. However, optimism is growing for 2024, with projected global IT spending growth of 5.7% to 8%. Some of the growth areas include software, IT services, and AI investments, with AI spending potentially reaching $200 billion by 2025. Cloud computing and cybersecurity are also expected to see strong demand.
The report states that Gen AI is gaining traction but it is expected to grow modestly in 2024, yet more strongly in 2025, with its integration into software and business processes driving productivity and efficiency. AI hardware demand is set to exceed $50 billion next year, while companies continue exploring AI monetization strategies.
Harnessing AI for Greater Energy Efficiency
Additionally, the growing influence of big tech companies and the increasing reliance on AI have led to a significant rise in energy demand. We discussed this in our article about the 13 Best Big Tech Stocks To Buy Now. Here is an excerpt from the article:
“A recent notable trend that people have begun to see because of the rise of big tech companies and the growing use of AI is a greater demand for power. Many major tech companies are beginning to require more energy, with the AWS-owner going as far as buying a nuclear-powered data center for $650 million recently.
The primary driving force for this rising demand is the need to develop AI. Many energy-conscious investors may see this new trend as a red flag for big tech. However, Jensen Huang has noted that while AI takes a ton of energy to train, once developed and trained, it will also help save energy. He particularly noted that AI is going to become so advanced through this development that it will eventually end up offering solutions that can change the way we use energy, making our operations endlessly more energy efficient.”
While concerns about the electricity needed to power AI are justified, according to industry pioneers like Nvidia CEO Jensen Huang, the technology itself will help solve that problem.
Our Methodology
For this article, we used the Finviz stock screener to identify 27 tech stocks with market caps of above $10 billion, Buy or Buy-equivalent ratings from analysts, and over 20% average price target upside. We narrowed our list to 8 stocks with the highest average analyst price target upside as of September 26. The best long term tech stocks are listed in ascending order of their average analyst price target upside.
We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is Global Payments Inc. (NYSE:GPN) the Best Long Term Tech Stock To Invest In Now?
Global Payments Inc. (NYSE:GPN)
Average Analyst Price Target Upside: 47.95%
Number of Hedge Fund Holders: 66
Global Payments Inc. (NYSE:GPN) is a leading provider of payment technology and software solutions that facilitate electronic transactions across the Americas, Europe, and the Asia-Pacific. The company offers a comprehensive range of products and services designed to advance the movement of money and manage financial transactions.
The portfolio includes payment processing, merchant services, point-of-sale solutions, and online and mobile payment options. The company caters to a diverse client base, from small businesses to large corporations, financial institutions, and government agencies.
In Q2, 66 hedge funds tracked by Insider Monkey held stakes in Global Payments (NYSE:GPN), with positions worth $3.678 billion. As of the second quarter, Pzena Investment Management is the most significant shareholder in the company. The firm has increased its stake in the company by 195% to 6.4 million shares worth $621.1 million.
At its recent 2024 Investor Conference, the company outlined a renewed focus on operational transformation and long-term value creation. It has identified potential divestitures that could account for approximately $500 million to $600 million in annual revenue.
It indicates a commitment to streamlining operations and enhancing profitability, which will allow Global Payments (NYSE:GPN) to concentrate on its core strengths and drive growth. The company has set ambitious yet achievable targets for 2025, with expectations of mid-single-digit growth in adjusted net revenue, around 10% growth in adjusted EPS, and a 50 basis point expansion in adjusted operating margins.
The outlook for the subsequent years, 2026 and 2027, is equally promising. It expects adjusted net revenue growth in the mid-to-high-single digits, with adjusted EPS growth projected in the low teens.
The company expects its ongoing transformation and streamlining efforts to generate over $500 million in run-rate operating income benefits by mid-2027, with around 30% of these benefits expected to materialize in 2025. The proactive approach to managing operations not only improves profitability but also positions the company favorably for sustainable performance in the competitive payments landscape.
Additionally, Global Payments (NYSE:GPN) has a consensus Buy rating from 37 analysts. As of September 26, the average price target of $144.50 implies an upside of 47.95% from the stock’s price. It is among our best long term tech stocks to invest in now.
Parnassus Investments stated the following regarding Global Payments Inc. (NYSE:GPN) in its Q2 2024 investor letter:
“Global Payments Inc. (NYSE:GPN) stock fell on investor fears that a slowing economy could weigh on payment processing companies. The company will host an investor day focused on improving efficiencies and strategic redeployment of assets in the fall, which we believe will unlock hidden value in the undervalued shares.”
Overall, GPN ranks 3rd on our list of the best long term tech stocks to invest in. While we acknowledge the potential of GPN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than GPN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
