Argus Downgrades VeriFone On Guidance Concerns

The brokerage believes slower upgrade of EMV terminal has hurt VeriFone, especially from small- and mid-sized retailers. As a result, the company slashed its revenue forecast for the current year and next year after reporting earnings beat in the third quarter on September 1.

The analyst does not expect any considerable appreciation in the stock price until the company enhances its earnings growth potentials. However, the shares are trading less than ten times Biggar's EPS estimate for next year.

In a research note to clients, Argus said, "VeriFone is increasing its focus on revenues from services, which accounted for 41 percent of total revenue in 3Q up from 35 percent a year earlier; however, systems revenue, including terminal sales, still accounts for the bulk of revenue. Given that management has lowered its sales and earnings guidance for several quarters, we believe that investors will need to regain confidence in the company's growth prospects before the shares can move higher."

Following the slashed outlook, the brokerage also expects flat revenue in the current year compared to its earlier predictions of 5 percent growth. Similarly, the analyst slashed his EPS forecast from $1.85 to $1.66 in the current year and from $2.17 to $1.79 next year.

At time of writing, VeriFone was essentially flat on the day at $16.80.

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