What Makes Corpay (CPAY) a Lucrative Investment? - InvestingChannel

What Makes Corpay (CPAY) a Lucrative Investment?

Third Point Management, a New York-based investment advisor, released its second-quarter 2024 investor letter. A copy of the letter can be downloaded here. The Third Point Offshore Fund returned 1.8% net in the second quarter compared to a 4.3% return for the S&P 500 INDEX (TR) and a 2.8% return for the MSCI WORLD INDEX (TR). In the first half of 2024, the Offshore Fund made profits across all strategies, achieving a 9.8% net return. Over the previous 12 months, the fund yielded a 17.0% net return. Although technology businesses accounted for a major portion of returns over this period, much of the portfolio is invested in various sectors, such as utilities, industrials, consumer, and healthcare. In addition, please check the fund’s top five holdings to know its best picks in 2024.

Third Point Management highlighted stocks like Corpay, Inc. (NYSE:CPAY) in the second quarter 2024 investor letter. Corpay, Inc. (NYSE:CPAY) is a payment company that helps businesses and consumers manage vehicle-related expenses. The one-month return of Corpay, Inc. (NYSE:CPAY) was 1.49%, and its shares gained 10.01% of their value over the last 52 weeks. On August 23, 2024, Corpay, Inc. (NYSE:CPAY) stock closed at $297.96 per share with a market capitalization of $20.688 billion.

Third Point Management stated the following regarding Corpay, Inc. (NYSE:CPAY) in its Q2 2024 investor letter:

“This quarter we added to Corpay, Inc. (NYSE:CPAY) (formerly FLEETCOR), a position we initiated in the Fourth Quarter of 2023. Corpay is a collection of network assets in the payments space, most notably a fuel card business, where the company processes fuel purchases by commercial vehicle operators, and a B2B payments business where Corpay facilitates vendor payments for midmarket clients. These two segments together make up >70% of Corpay revenues. The company is run by CEO of 24 years, Ron Clarke, who in our view has delivered an impressive track record for shareholders of 20% compounded EPS growth since going public in 2010, including 15% over the last 10 years, through a combination of revenue growth, margin expansion, and accretive capital allocation in M&A and share repurchases.

Over the last five years, CPAY has seen its P/E multiple significantly de-rate from the mid-20s to ~13x as market sentiment toward the company’s core fuel card business soured. Firstly, growth in the segment has slowed as the market has matured. Secondly, the rise in popularity of electric vehicles (EVs) as a theme has made investors question the terminal value of a business whose main function is to process gasoline and diesel payments. Corpay has proactively prepared for an EV transition by making acquisitions in EV charging payments and adding mixed/EV fleets to its customer base, wherein CPAY earns higher unit economics on mixed fleets than it does on pure internal combustion engine fleets. Finally, the last year has demonstrated that a transition to an electric fleet is more easily said than done. With EV sales declining for industry bellwether Tesla, European EV sales declining overall, and flattening in the US, it is becoming clear that the journey of automotive electrification will be a long one…” (Click here to read the full text)

A consumer signing their loan documents after being given financing options to purchase their dream product.

Corpay, Inc. (NYSE:CPAY) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held Corpay, Inc. (NYSE:CPAY) at the end of the second quarter which was 32 in the previous quarter. While we acknowledge the potential of Corpay, Inc. (NYSE:CPAY) 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 as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we discussed Corpay, Inc. (NYSE:CPAY) and shared the list of best growth stocks to buy according to Billionaire Dan Loeb. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.

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