Why Credit Suisse Raised VeriFone’s Target to $32 Per Share

Price movement of VeriFone Systems

VeriFone Systems (PAY) has a market cap of $3.1 billion. PAY fell by 0.56% to close at $28.32 per share on March 21, 2016. The price movements on weekly, monthly, and year-to-date (or YTD) bases were 1.1%, 21.8%, and 1.1%, respectively.

Why Credit Suisse Raised VeriFone’s Target to $32 Per Share

Currently, PAY is trading 9.5% above its 20-day moving average, 17.9% above its 50-day moving average, and 2.6% below its 200-day moving average.

The Vanguard Small-Cap ETF (VB) invests 0.13% of its holdings in VeriFone Systems. The ETF tracks the CRSP US Small Cap Index. The market-cap-weighted index includes the bottom 2%–15% of the investable universe. The YTD price movement of VB was 0.03% as of March 18, 2016.

The market caps of VeriFone’s competitors are as follows:

  • PayPal Holdings (PYPL): $50.3 billion
  • NCR (NCR): $3.8 billion
  • Heartland Payment Systems (HPY): $3.4 billion

Credit Suisse raised VeriFone price target

Credit Suisse raised the price target of VeriFone Systems to $32 per share from $29 per share. It maintained the company’s rating as “neutral.”

VeriFone’s performance in fiscal 1Q16

VeriFone Systems reported total fiscal 1Q16 revenues of $513.5 million, a rise of 5.6% compared to total revenues of $486.2 million in fiscal 1Q15. The revenues of its systems and services segments rose by 7.7% and 1.8%, respectively, in fiscal 1Q16 compared to 1Q15. The company’s gross profit and operating income rose 8.1% and 56.0%, respectively, in fiscal 1Q16 compared to fiscal 1Q15.

VeriFone’s net income and EPS (earnings per share) rose to $23.5 million and $0.21, respectively, in fiscal 1Q16, compared to $13.8 million and $0.12, respectively, in fiscal 1Q15.

Its cash and cash equivalents fell 11.1%, and its inventories rose 5.4% in fiscal 1Q16 compared to fiscal 4Q15. Its current ratio and debt-to-equity ratio rose to 1.46x and 2.0x, respectively, in fiscal 1Q16, compared to 1.45x and 1.7x, respectively, in fiscal 4Q15.

The price-to-earnings and price-to-book-value ratios of VeriFone Systems are 36.8x and 3.8x, respectively, as of March 21, 2016.

Projections

VeriFone Systems has made the following projections for fiscal 2Q16:

  • non-GAAP (generally accepted accounting principles) net revenues of $530 million
  • non-GAAP EPS in the range of $0.51–$0.52

VeriFone Systems has made the following projections for fiscal 2016:

  • non-GAAP net revenues in the range of $2.15 billion–$2.17 billion
  • non-GAAP EPS in the range of $2.21–$2.24

The company’s fiscal 2016 guidance reflects its better-than-expected performance in 1Q16 and its partial-year revenue contributions. It also reflects the company’s modest EPS accretion from its recent acquisitions of InterCard and AJB Software Design.

In the next part of this series, we’ll look at JPMorgan Chase’s raised price target for Nike.