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Why VeriFone Systems Shares Sank

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronic payment company VeriFone Systems (NYSE: PAY  ) plunged 11% today after its quarterly results and guidance came in below Wall Street expectations.

So what: VeriFone's third-quarter profit managed to top estimates, but a miss on the top line -- revenue of $489.1 million versus the consensus of $498 million -- coupled with downbeat guidance, is forcing analysts to lower their valuation estimates. Management cited unfavorable currency movements, intensifying competition in Europe, and a fire in Brazil for the revenue shortfall, raising plenty of concerns about the company's growth prospects going forward.

Now what: Management now sees fourth-quarter adjusted EPS of $0.75 to $0.77 on revenue of just $495 million to $500 million, versus the consensus of $0.74 and $521 million, respectively. "Despite continued volatility around exchange rates, our business remains vibrant in all geographies," CEO Douglas Bergeron reassured investors. "We are excited about our prospects for 2013 and beyond." Given the foreign exchange, competitive, and operational uncertainty surrounding VeriFone, however, I'd need a much larger margin of safety before buying into that bullish talk.

Interested in more info on VeriFone? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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10/24/2016 4:01 PM
PAY $15.63 Down -0.17 -1.08%
VeriFone Holdings CAPS Rating: ****