December 14, 2012
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 point-of-sale device provider VeriFone Systems (NYSE: PAY ) dipped as much as 13% following the release of its fourth-quarter earnings results and 2013 fiscal guidance.
So what: As usual, it wasn't what the company did, but where it's going that has the market worried. For the fourth quarter, organic growth in North America roared higher by 22% and profits jumped 43% over the year-ago period. That would prove to not be enough, as VeriFone cautioned that spending isn't expected to pick up until late 2013 and forecast first-quarter EPS in the range of $0.70-$0.73 which is light of current Wall Street estimates. Fittingly enough, though, VeriFone left its full-year EPS forecast unchanged and in line with Street estimates.
Now what: Even with the prospect of added competition in the point-of-sale arena from the likes of privately held Square and eBay with its own POS devices and PayPal, VeriFone's biggest obstacle is going to be small business spending. As VeriFone continues its push toward mobile devices, I think you'll see the wild swings associated with its cyclical business lessen, but this is going to take some time. In the meantime, at just nine times forward earnings I have to admit that VeriFone has my attention as a very attractive long-term play.
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