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BTIG Initiates Coverage of VeriFone Systems

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Price movement

VeriFone Systems (PAY) has a market cap of $2.2 billion. It fell 2.6% to close at $16.73 per share on September 9, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -16.8%, -10.5%, and -40.3%, respectively, on the same day.

PAY is trading 11.0% below its 20-day moving average, 11.2% below its 50-day moving average, and 30.1% below its 200-day moving average.

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Related ETF and peers

The Schwab US Broad Market ETF (SCHB) invests 0.01% of its holdings in VeriFone Systems. The ETF tracks a cap-weighted index that measures the largest 2,500 stocks in the United States. The YTD price movement of SCHB was 5.5% on September 9, 2016.

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

  • PayPal Holdings (PYPL): $45.6 billion
  • NCR (NCR): $4.0 billion
  • Global Payments (GPN): $11.4 billion

VeriFone Systems’ rating

BTIG has initiated coverage of VeriFone Systems with a “buy” rating and has set the price target at $21 per share.

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Performance of VeriFone in fiscal 3Q16

VeriFone Systems (PAY) reported fiscal 3Q16 total net revenues of $488.1 million, a decline of 4.3% compared to its total net revenue of $509.9 million in fiscal 3Q15. Its net revenue from the North America, Latin America, and Asia-Pacific regions fell 8.2%, 25.2%, and 6.4%, respectively. Its net revenue from EMEA (Europe, the Middle East, and Africa) increased 10.1% in fiscal 3Q16 over fiscal 3Q15.

The company’s gross profit margin fell 3.3% in fiscal 3Q16 over fiscal 3Q15. It reported litigation settlement and contingency loss expenses of $0.6 million in fiscal 3Q16.

EPS and cash

VeriFone’s net income and EPS (earnings per share) fell to -$31.1 million and -$0.28, respectively, in fiscal 3Q16, compared to $9.5 million and $0.08, respectively, in fiscal 3Q15. It reported non-GAAP[1. generally accepted accounting principles] EPS of $0.42 in fiscal 3Q16, which represented a decline of 10.6% compared to fiscal 3Q15.

VeriFone’s cash and cash equivalents declined 25.0%, and its inventories increased 41.2% in fiscal 3Q16 over fiscal 4Q15. Its current ratio fell to ~1.4x, and its debt-to-equity ratio rose to 2.0x in fiscal 3Q16, compared to a current ratio and debt-to-equity ratio of ~1.5x and 1.6x, respectively, in fiscal 4Q15.

Projections

VeriFone (PAY) has made the following projections for fiscal 4Q16:

  • non-GAAP net revenue of $460 million
  • non-GAAP EPS of $0.28–$0.29

The company has made the following projections for fiscal 2016:

  • non-GAAP net revenue of $2 billion
  • non-GAAP EPS of $1.64–$1.65

In the next part of the series, we’ll take a look at Estée Lauder (EL).

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