The trend toward wired Americans' doing their banking and bill-paying online seems inexorable. According to the most recent information I've seen, the number of people banking online increased by more than 50% from 2003 to 2004. Estimates show that more than -- perhaps many more than -- 60 million people now bank online, with an increasing proportion of those people saving $0.37 a pop by paying their bills online (and starving the U.S. Postal Service of revenue in the process).
E-bill processor CheckFree
For its fiscal 2005 second quarter, CheckFree's revenues rose 24% versus fiscal Q2 2004. Profits came in at $0.14 per diluted share, versus a $0.02 per-diluted-share loss in the year-ago period. Over the past six months, CheckFree did similarly well, earning $0.21 per diluted share (against a $0.10 loss in the fiscal first half of 2004) on a 25% gain in revenue.
Wall Street's reaction to the news was no surprise. After falling 2% in anticipation of an underwhelming report, CheckFree shares shot up nearly 5% in a wave of after-market buying. CheckFree is one heavily shorted stock, with more than 14% of its float sold short. Likely, much of last night's buying was by shorts rushing to close out their bets against the company.
But one has to wonder why, exactly, those bets were placed in the first place. According to Yahoo!
To the shorts who escaped their positions last night, I can only say, "Well done." Best to get out while the getting is still good. Those who remain short on the company, though, should perhaps reconsider why they're betting against a not-overpriced, debt-free, cash-generating company that's riding a long-term trend in its favor. To this Fool, shorting sounds like a recipe for disaster.
For further Foolish musing on CheckFree, read:
- What's in CheckFree's Future?
- CheckFree's Profitable Payments
- CheckFree Woos Wachovia
- CheckFree Pretties Up Results
Fool contributor Rich Smith has no position in any of the companies mentioned in this article.