VeriFone's Diversified Payments Services Will Benefit From Bigger Transactions
NEW YORK (TheStreet) – Business today is in the midst of a payment revolution. Consumers are looking for more convenient ways to pay for products and services -- but more important than mere ease-of-use, they want payment options that are also safe from hackers and cybercriminals.
Although VeriFone Systems (PAY) has disappointed investors with its stock performance thus far in 2015, the company -- which makes terminals for electronic cash register payments -- is entering a period where its products and services will be in high demand, ensuring both future revenue and profit growth. And ahead of its fiscal first-quarter report Tuesday, investors have plenty to be optimistic about.
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As of Monday's open of $34.09, the San Jose-based company has seen its stock lose about 5% of its value in the past month, with overall losses of almost 9% in 2015 -- well behind the performance of the broader averages. There's simply nothing pretty about the above chart. However, what investors should focus on is the attractiveness of VeriFone's business, which services roughly every industry, including financial, retail, hospitality, oil/gas, transportation, government and healthcare.
What sets VeriFone apart from competitors such as NCR Corporation (NCR) - Get Report and Global Payments (GPN) - Get Report, is that VeriFone calls itself (please pardon the jargon) a total payments solutions provider. In other words, it doesn't just provide cash-register systems, it offers value-added services such as consulting and project management to help its partners and customers get the sort of customized software solutions they need.
This is important because every industry is different, with its own sets of risks related to the payment process. To help its clients deal with those unique issues, VeriFone, which makes money from each consumer transaction, acts more as a partner than a hardware or software vendor.
Making its business prospects even more attractive, VeriFone's devices are capable of handling every type of electronic transaction, whether signature required or PIN-based debit cards and credit cards. And the company is a leader in the security standard for authenticating transactions known as EMV (Europay, Mastercard, Visa), a global standard for operating point-of-sale terminals and ATM machines.
Revelations of data breaches at retailers likeTarget (TGT) - Get Report and Home Depot (HD) - Get Report have heightened consumer and business awareness about the importance of point-of-sale security, which means VeriFone's services will continue to be in high demand, especially as retailers adapt to new mobile payment options such as Apple's (AAPL) - Get Report Apple Pay.
In short, wherever payments are being accepted, VeriFone has a market it can service. And according to the National Retail Federation, consumers are coming off one of the busiest holiday seasons in retail, which means VeriFone's earnings results for the quarter that ended in January should see incremental benefits.
Analysts expect the company to report a 32% jump in earnings per share, reaching 41 cents, while revenue is projected to climb 11% above last year to $483 million. For the full year that ends in October, earnings are projected to climb 26% to $1.90 per share, while revenue is projected to climb 9% to $2.03 billion.
In both cases -- quarterly and full year -- earnings are projected to grow at least three times faster than revenue, suggesting the company is focusing more on the bottom line and ways to return value to shareholders. For this reason, analysts have assigned VeriFone a consensus buy rating with an average 12-month price target of $40, about 18% higher than than the stock is currently trading.
This article is commentary by an independent contributor. At the time of publication, the author held shares of Apple.
