VeriFone Systems Inc PAY reported its F2Q16 EPS short of expectations and lowered its FY16 EPS guidance. Barclays’ Darrin D. Peller downgraded the rating for the company from Overweight to Equal-weight, while reducing the price target from $37 to $23. The analyst expressed concern regarding visibility into the company's margin profile and emerging market opportunities.
VeriFone reported its F2Q16 non GAAP EPS at $0.47, short of the Barclays estimate for $0.53 and consensus expectation of $0.52. Revenue came in at ~$532mn, marginally higher than the Barclays estimate of ~$530mn and the Street's $530mn.
Analyst Darrin Peller noted that VeriFone’s quarterly results had been impacted by:
- Ongoing softness in media sales
- Delays in US EMV certifications
- Higher price competition in certain emerging markets
The EPS estimates for FY1 and FY2 have been reduced from $2.24 to $1.85 and from $2.64 to $2.09, respectively.
Challenges In The Near Term
Peller expressed confidence in management's strategic vision and ability to shift revenue towards services in the longer term. He believes concerns around a revenue cliff in North America are overblown.
The analyst mentioned, however, that in the near term, VeriFone would be challenged by:
- Higher price competition in emerging markets as well as "sustainably weak macro environments"
- Gross margin pressure due to US revenue mix
- Certification or tender delays related to NA and China
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