Benjamin Graham once opined that in the short-term the market is driven largely by sentiment like a voting machine. However, in the long-term, it acts more like a weighing machine (i.e. the stock price will eventually reflect the true value of the company). Verifone looks very much like a business that has fallen out of favor with the market’s voting machine and its stock price will probably continue to plunge even further than the 40% drop it recently suffered. However, only time will tell if the business actually deserves the punishment that the market has doled out to their stock price yesterday. Judging by the strength of its underlying business and the relative valuation of Verifone as compared to its peers, I am inclined to believe that the market has gotten it wrong on Verifone this time.
Written by Kapitall Contributor SiHien Goh