A lot of the market chatter before the announcement yesterday has been the perceived rising threat of new entrants such as Square. What Square does is to allow businesses to use a small device that can be plugged into a mobile platform such as an iPhone or an iPad in order to collect payments on the go. With gross revenue of about $40 million and zero profits to show for its venture so far, Square is now valued at the private market at $3.25 billion. Verifone, with $1.8 billion in annual revenue to boot, is valued today by the market at a billion dollars less than a scrawny technology upstart. Again, Square made $40 million with an ‘M’ and Verifone made $1.8 billion with a ‘B’. Yet somehow, Square is valued much more than Verifone.The father of value investing, Benjamin Graham, once taught us about a quirky little fellow called Mr. Market. Mr. Market is somebody who turns up every day at the stock holder’s door offering to buy or sell his shares at a different price. Usually the price quoted can be plausible and close to what the stock is actually worth. Occasionally, it is ridiculous. Verifone’s stock price in relation to Square’s private valuation definitely looks a little out of whack.
Verifone – Looking More Like A Value Stock Every Day
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