What VeriFone Has to Do to Recover

On Wednesday, VeriFone Systems (NYSE: PAY  ) will release its latest quarterly results. With its stock having plunged after giving troubling guidance back in February, the payment processor has something to prove to investors in this quarter's report.

VeriFone has the potential for greatness, given its importance in the payment processing industry. Yet competition has become cutthroat among various players in the space, which include not only traditional rivals but also up-and-coming new upstarts that are making their presence felt in a big way. Let's take an early look at what's been happening with VeriFone over the past quarter and what we're likely to see in its quarterly report.

Stats on VeriFone

Analyst EPS Estimate

$0.47

Change From Year-Ago EPS

(27%)

Revenue Estimate

$440.29 million

Change From Year-Ago Revenue

(8.2%)

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will VeriFone pay off for investors this quarter?
In the past three months, analysts have cut their views on VeriFone's earnings further, even after the initial shock of February's poor guidance. Their estimates on the April quarter have declined by $0.03 per share, but the hits to consensus for the current and next fiscal years amount to a more significant $0.15 per share. The stock has recovered somewhat, though, rising more than 20% since the beginning of March.

After the February guidance cut, VeriFone wasted no time taking action. In early March, the stock roared higher after the company said that CEO Douglas Bergeron would step down, ending his 12-year tenure and signaling VeriFone's ambition to move in a new strategic direction.

One important area that hasn't gotten a lot of attention is payment processing centers on international markets, and there, VeriFone got some good news in April. The company got a two-year contract with ChinaPnR to install and maintain point-of-sale systems and provide training to users, giving it access to a payment network with volume in the hundreds of billions of yuan. With point-of-sale transactions rising dramatically in the emerging-market country, VeriFone is smart to build on its presence there.

But the key to payment processing's future remains the mobile market, and there, VeriFone faces huge competition. eBay's (NASDAQ: EBAY  ) PayPal has consistently upped the ante in mobile payments, with incentives like offering transaction-fee-free processing for businesses that replace cash registers with iPad-based transaction management. With smaller companies like Square and Flint having emerged in the mobile space, it's likely only a matter of time before bigger companies acquire the upstarts to move their mobile-payment presence forward. For instance, if Groupon (NASDAQ: GRPN  ) is serious about trying to make waves in mobile payments, purchasing Square would be a natural fit for the company.

In VeriFone's report, watch to see how management handles its first quarterly report after Bergeron's departure. Whenever there's a leadership vacuum at a company, it's essential that management take the initiative to demonstrate command of the company and its strategic vision looking forward. 

Groupon's story is one of the American Dream. The company went from 400 subscribers in 2008 to over 150 million today. While this story is definitely one of triumph on a business level, its success most certainly hasn't been shared by investors. Company shares have fallen over 80% over the past year and left investors panicked. Will this company live out its American Dream, or leave shareholders empty-handed? In order to answer that question, our analyst has compiled a premium research report with in-depth analysis on whether you should buy or sell Groupon right now, and why. Simply click here now to get started.

Click here to add VeriFone to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2467421, ~/Articles/ArticleHandler.aspx, 9/21/2014 12:47:34 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement