Nexi's Q1 Lines up With Expectations But We Lower Our Fair Value Estimate

Narrow-moat Nexi reported first-quarter EBITDA of EUR 307.5 million, slightly ahead of the EUR 302 million consensus estimate collected by the company itself. Although performance was in line with our expectations, we are lowering our fair value estimate to EUR 15.80 from EUR 18.00 per share previously. We had anticipated a strong rebound from easy COVID-19-related comparables to drive a slightly above 7% revenue CAGR over the next ten years. However, with the prospect of higher energy costs weighing on international travel, especially from Asia, another round of COVID lockdowns toward the fall, and Europe on the brink of a recession, we believe these assumptions will prove optimistic. Our new revenue growth assumption sits closer to 6% on an annual basis, with the lower revenue estimates partially offset by less meaningful variable cost expansion. Nevertheless, we believe Nexi’s shares are oversold and offer a respectable upside. We don’t think the industry’s structural growth drivers such as the shift from cash to card payments across Europe and the disintermediation of banks in the payments space have been altered due to the macroeconomic shocks in Europe. We see good buying opportunities across the European payment space, including Nexi.