Market Overview

VeriFone and Other Top Global Payments Stocks

Making payments with cash and checks may never completely go out of style, but the rapid changes in electronic money transfer, point-of-purchase payments and the like are making it easier than ever to pay for purchases.

Now analysts at UBS (NYSE: UBS) have recommended three stocks in the sector to buy: Fidelity National Information Services (NYSE: FIS), Global Payments (NYSE: GPN) and VeriFone Systems (NYSE: PAY).

Note that UBS also mentioned Blackhawk Network Holdings (NASDAQ: HAWK), EVERTEC (NYSE: EVTC) and Xoom (NASDAQ: XOOM) as contenders in the field, as well as credit card giants MasterCard (NYSE: MA) and Visa (NYSE: V).

Fidelity National Information Services

This Jacksonville, Florida-based provider of banking and payments technology solutions sports a market capitalization of a little more than $13 billion. The dividend yield is near 2.0 percent. The long-term earnings per share (EPS) growth forecast is about 12 percent. The price-to-earnings (P/E) ratio is higher than the industry average, though, but so is the operating margin.

The short interest in Fidelity National Information Services was about one percent of the float as of the May 15 settlement date. But that was the second highest number of shares sold short in the past year, after marginally declining from the previous period. The days to cover remains less than two.

The consensus recommendation of the analysts that follow the stock and were polled by Thomson/First Call is to hold shares, and it has been for at least three months. The mean price target, or where the analysts expect the share price to go, is only marginally higher than the current share price. However, the UBS target is about seven percent higher than the share price.

The share price is up more than 25 percent year-to-date and reached a multiyear high last week. Over the past six months, the stock has outperformed Fiserv (NYSE: FISV), Global Payments and VeriFone Systems, as well as the broader markets.

Global Payments

This provider of electronic payment transaction processing services has a market cap of more than $3 billion but a dividend yield of only about 0.2 percent. The long-term EPS growth forecast is more than 11 percent, and the P/E ratio is higher than the industry average. The return on equity is more than 15 percent.

The short interest in this Atlanta-based company was more than six percent of the total float at mid-May. That was more than double the number of shares sold short in mid-April and the highest level of short interest in at least a year. The days to cover jumped from about five in the previous period to about seven.

Half of the 30 analysts surveyed recommend buying shares, with five of them rating the stock at Strong Buy. And the analysts think shares have plenty of headroom, as their mean price target is more than 13 percent higher than the current share price. The UBS price target implies more than 16 percent potential upside.

The share price has not yet fully recovered from a nine percent plunge in early April, and it is currently about four percent higher than at the beginning of the year. Over the past six months, the stock has outperformed VeriFone Systems, but it has underperformed the broader markets.

VeriFone Systems

This global electronic payment solutions service provider is headquartered in San Jose, California, and has a market cap of about $2.5 billion. It offers no dividend. The long-term EPS growth forecast is about 13 percent. VeriFone's operating margin is greater than the industry average, but so is the P/E ratio.

The number of shares sold short as of the most recent settlement date represented a bit more than six percent of the total float, after rising more than 16 percent in the previous month. But the average daily volume was the lowest it has been so far this year. The days to cover rose to more than four.

Only five of the 18 analysts polled recommend buying shares. The consensus recommendation has been to hold VeriFone shares for the past three months. The mean price target suggests that the analysts see little upside potential at this time. Even the UBS price target indicates just six percent implied upside.

The share price plunged about 46 percent back in February, hitting a new multiyear low. Shares have traded mostly between $22 and $24 for the past month. Because of that pullback, the stock has underperformed Fidelity National Information Services, Global Payments, NCR (NYSE: NCR) and the broader markets.

Posted-In: Blackhawk Network Holdings EVERTEC fidelity national information services Fiserv global paymentsLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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