|Shares Out. (in M):||122||P/E||0||0|
|Market Cap (in $M):||3,700||P/FCF||0||0|
|Net Debt (in $M):||0||EBIT||0||0|
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The below write-up focuses on what has changed at NCR since previous posts. For those not familiar with the business, a general description of NCR can be found in the write-up posted on June 15, 2017 and we'd also point you to the Company's Investor Day presentation from Nov 7, 2018 (https://investor.ncr.com/static-files/7f1f62e4-53f4-469c-8683-993cb70f997c)
In the write-up we discuss eight main points that we believe will drive more than 50% upside in the stock through 2020. Despite these materially positive changes, the stock is flat over the past twelve months and since new management joined last April (shortly after which, the new CEO bought in the open market at $29 a share, not much lower than today's price). Additionally, the stock has also massively underperformed since Blackstone bought at $30 per share in 2015.
We discuss each of these eight points in greater detail below:
Q4 '18: "We think we'll get a little growth out of ATM business this year into '19."
Q1 '19: "And you can see in the first quarter, the results are strong. As Andre talked about, the backlog heading into the second quarter is also very strong. So I feel very good about the second quarter. I think we talked about this heading into the year, we felt that '19 would be a solid year for us in the ATM business, and it's starting to bear out that way. On the digital banking that you referenced, I think we feel pretty good about -- I think -- actually probably better than pretty good."
As seen in the above excerpt, management was also bullish on Q2. Additionally, while at FIS management earned a "conservative beat and raise" reputation. With 2019 as their first full year under the helm, we believe management is setting themselves up to repeat this formula going forward. Street numbers are currently in line with Company's guidance.
In our base case, we see over 50% upside for NCR by year-end 2020 using a 12x FCF multiple. In our more bullish cases, we see over 75-100% upside potential from multiple expansion due to their transition towards a higher-margin and more recurring software business model (during their Nov 2018 Investor Day new management targeted software and services revenue to represent 80% of the total by 2023, up from 2/3 today) and upside to opportunities such as payments where we believe we may be overly-conservative.
The information provided in this presentation is provided for informational purposes and is not investment advice or a recommendation to purchase or sell any specific security.
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