Why VeriFone Shares Got Crushed

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  ) plummeted 38% today after its first- and second-quarter outlook easily missed Wall Street expectations.

So what: VeriFone's preliminary first-quarter results -- EPS $0.47-$0.50 versus its prior view of $0.73 -- and downbeat second-quarter guidance are forcing analysts to drastically recalibrate their growth estimates. While management blamed the gloomy outlook largely on the economic weakness in Europe, investors are worried that such a wide miss suggests far more serious internal and competitive challenges.

Now what: Management now sees second-quarter EPS of $0.45-$0.50 on revenue of $435 million-$450 million, well below Wall Street's view of $0.80 and $517 million. "While we are disappointed with our performance and execution, we have a firm grasp on the challenges we faced and are taking aggressive steps to strengthen our competitiveness over the long-term," said CEO Douglas Bergeron. "We are confident in our ability and committed to executing against our strategic priorities to drive shareholder value." With the stock now off a whopping 65% from its 52-week high and trading at a forward P/E of 5, betting on that turnaround talk might even be worth looking into.

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

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  • Report this Comment On February 22, 2013, at 5:14 AM, PaymentsPro wrote:

    VeriFone is facing competition from low cost providers such as Square in the US and iZettle in Europe. That will erode margins in the long term and VeriFone currently has no clear strategy as to how they are able to compete on this basis. Their core technology platform is looking increasingly out of touch with the market demands for high functionality and low cost of ownership

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