DA Davidson Bullish On Prospects For Cardtronics' Allpoint Surcharge-Free Network

Although Cardtronics PLC CATM has recently faced several obstacles that tarnished its strong long-term track record, the overall company and its Allpoint surcharge-free network are unique assets, according to D.A. Davidson.

The Analyst

Peter Heckmann initiated coverage of Cardtronics with a Buy rating and $38 price target.

The Thesis

Cardtronics owns, operates or provides select services for 228,000 ATMs in 10 countries across four continents, Heckmann said in a Thursday initiation note.

Out of the company’s owned ATMs, 55,000 are included in the Allpoint network, making it the world’s largest surcharge-free ATM network, the analyst said. With more than 1,200 financial institutions and stored-value debit card operators participating in the network, the number of cardholders has crossed 60 million, he said. 

While the Allpoint network is already being used by traditional banks, the value it brings will increasingly be recognized by non-traditional banking competitors, such as fintech startups, prepaid providers and digital-only banks, Heckmann said. 

The network is being enhanced with capabilities like deposit-taking units, which could increase transactions for Cardtronics’ ATMs and gain more mileage from the fixed costs of the network.

At its first investor day in March, Cardtronics announced aspirational guidance of 3-5-percent revenue growth and 7-9-percent adjusted EBITDA growth for the next three years, the analyst said. 

In D.A. Davidson's view, growth will be spearheaded by U.S. operations, with the drag on growth by the U.K. and Australian markets diminishing over time. 

Price Action

Shares of Cardtronics slipped slightly to close trading at $30.40 on Thursday.

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