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Euronet Has Doubled Off Its Lows, But Isn't Fully Valued Yet

Mar. 08, 2021 3:46 PM ETEuronet Worldwide, Inc. (EEFT)
Stephen Simpson profile picture
Stephen Simpson


  • Euronet's reliance on cross-border travel was made clear in 2020, but recovering travel should drive better results in 2021 and 2022.
  • Ongoing bank branch closures in Europe create new ATM opportunities for Euronet, while opportunities like DCC support volume/location growth in Asia.
  • Money transfer remains a strong growth opportunity, as Euronet continues to gain share through price, agent location growth, and investments in digital capabilities.
  • High-single-digit revenue growth and improving FCF margins can drive double-digit annualized returns from here.

When I last wrote about Euronet (NASDAQ:EEFT) in the summer of 2019, I wrote that although I didn’t really like the price/valuation at the time, “this is a somewhat unusual point in Euronet’s history, as I don’t see much to worry about.” Nature abhors a vacuum, and a new worry emerged about six months later, with the COVID-19 pandemic radically impacting travel in Europe, hammering the ATM business. The epay and money transfer businesses have held up much better, but with the ATM business as large as it is, Euronet basically saw a lost year in 2020.

Looking ahead from today, I do expect travel to start recovering in Europe; probably not so much in 2021, but in 2022 and beyond. I also expect ongoing branch reductions in Europe to drive more demand for the company’s ATMs from non-tourists. Beyond that, the epay business remains an underappreciated growth business, and the money transfer business continues to gain share. While Euronet remains an odd, and maybe under-followed, business, upside into the $180s merits some consideration.

Waiting For Tourists To Come Back

A significant part of the thesis of sell-side bulls is that Euronet is well-placed to benefit from the ongoing closing of bank branches across Europe, as banks look to cut operating costs as a way of offsetting weak core spread growth. While that’s valid to a point, results in 2020 do underline just how important tourism remains to this business.

Revenue from Electronic Funds Transfer (the ATM business) declined 50% in the fourth quarter on an 11% increase in transactions. The big discrepancy is the absence of lucrative cross-border transaction revenue including dynamic currency conversion (or DCC).

International-based transactions were still trending down 80% or more across Europe in the fourth quarter on a combination of travel restrictions/quarantines and low demand. Domestic

This article was written by

Stephen Simpson profile picture
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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