Wall Street Reacts To VeriFone Earnings

• VeriFone Systems Inc PAY opened sharply lower following Q3 earnings.
• Of four early notes from Wall Street analysts, three maintained Overweight and Outperform ratings including Barclays, Pacific Crest and Wedbush.
• Deutsche Bank is the contrarian in the group, saying that "growth moderation concerns" were "confirmed."

In VeriFone's Q3 earnings report, the company beat expectations as U.S. sales grew by 61 percent, while its emerging market segment also improved. However, analysts said that foreign exchange is still a headwind, causing even the bullish analysts to reduce estimates.

Darren Peller at Barclays (Overweight; $42 price target) noted that the Q4 and FY 2015 guidance "remains conservative." He pointed out that the company beat on Q3 by nearly $12.5 million, yet only adjusted its FY 2015 revenue guidance higher by $2 million. Peller seemed unconcerned with the fact that adjusted EBIT margins came in below expectations – the result of "higher than anticipated System Solutions expense driven by a one-time non-recurring warranty claim."

Similarly, Josh Beck at Pacific Crest (Outperform; $39 price target) brushed off any negatives from the report, reiterating that the company still had a "positive risk/reward" setup. Beck also argued that an upcoming product launch and improved international results could drive shares higher.

Wedbush's Gil Luria (Outperform; $40 price target) echoed Peller's analysis that Q4 guidance is "conservative," particularly given the "domestic growth opportunity." However, Luria also cut the price target by $7 – or nearly 15 percent – to account for "lower estimates and lower comparable margins."

Bryan Keane at Deutsche Bank (Hold; $29 price target) disagreed with the other firms' analysis, saying that the Q3 report confirmed "growth moderation concerns." Further, gross margins disappointed, Keane said, while also forecasting that margins would not have the room to improve in Q4 as "improvement could be offset in 4Q by seasonally higher OpEx and investments in sales and marketing."

Year-to-date, VeriFone has declined 16 percent, closing on Thursday at $31.08. Shares traded recently at $30.85.