Will Qiwi plc Earnings Produce PayPal-Like Growth Wednesday?

Qiwi (NASDAQ: QIWI  ) will release its quarterly report on Wednesday, and the stock has been extremely volatile lately in light of both business-related and geopolitical concerns. Even though supporters believe that Qiwi has the same potential as eBay's (NASDAQ: EBAY  ) PayPal to transform the way people make electronic payments in Russia and around the world, others worry that regulatory restrictions could hamper the company in trying to expand its service beyond Russia's borders to become a truly global player in the fast-growing industry.

Qiwi provides many basic financial services that U.S. residents take for granted, such as simple bill payments and other ordinary transactions. Yet in other areas of the world, the infrastructure to support those services isn't nearly as extensive as it is elsewhere in the world. In South Africa, Net 1 UEPS Technologies (NASDAQ: UEPS  ) has taken advantage of that opportunity to build a valuable niche in payment services, and Qiwi has worked hard to make similar moves in Russia. Still, with the threat of economic sanctions looming over Russia in light of its Ukrainian situation, investors aren't sure whether Qiwi's future will be as bright. Let's take an early look at what's been happening with Qiwi over the past quarter and what we're likely to see in its report.


Will conflict between Russia and Ukraine hurt Qiwi? Image source: Ivan Bandura via Flickr

Stats on Qiwi

Analyst EPS Estimate

$0.28

Change From Previous Quarter's EPS

(20%)

Revenue Estimate

$50 million

Change From Previous Quarter's Revenue

(0.4%)

Earnings Beats in Past 4 Quarters

3*

Source: Yahoo! Finance; *In three quarters since going public

Can Qiwi earnings survive Russian conflict?
In recent months, analysts have cut their Qiwi earnings estimates, reducing fourth-quarter projections by a penny per share and full-year 2014 estimates by $0.04 per share. The stock has fallen sharply, losing 15% since early December.

Qiwi showed the potential the company has in its third-quarter earnings report, which included a nearly 50% rise in adjusted revenue and similarly impressive growth in adjusted earnings. With an increase in full-year 2013 guidance for both net income and sales growth, Qiwi looked like it was making the most of its partnership with Visa (NYSE: V  ) on its Qiwi Wallet product. A 53% jump in active users to 15 million and a 63% jump in payment volume helped drive enthusiasm about the stock. Those growth numbers greatly resemble what eBay's PayPal produced early in its history and points to the importance of the payment industry, especially in emerging-market economies.

But since then, Qiwi has seen new challenges arise. In mid-January, the stock plunged 17% after reports of possible new regulations that the Russian government might impose on Qiwi and other payment-services providers in an effort to counter terrorism. The measures would limit the amount of allowable transfers to foreign destinations or potentially ban them entirely, greatly reducing the value of the Qiwi network for many Russian users.

More recently, Russia's aggressive moves toward Ukraine have soured foreign investors on the Russian stock market generally, and that has sent Qiwi shares down even more sharply. With the threat of the international community imposing economic sanctions on Russia, it's highly unclear whether one of the lynchpins of Qiwi's business model could get crushed by geopolitical events. Nevertheless, the longer-term opportunity for Qiwi remains intact, making it attractive to those willing to ride out short-term volatility.

In the Qiwi earnings report, look closely to see how the company is responding to these threats to its business model. If it can weather this storm, then Qiwi could emerge even stronger than before and reward patient investors in the process.

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