VeriFone Systems: Imperial Stays On Sidelines

Imperial Capital remains sidelined on VeriFone Systems Inc PAY with an In-Line rating and $18 price target after the company issued modest outlook for 2017 given slower EMV adoption.

VeriFone noted that FY 2017 revenue could decline by roughly 4 percent year-over-year (yoy). The company sees revenue of $1.89 billion–$1.91 billion due to the payment networks’ decision to delay the liability shift deadline for EMV at-the-pump by three years, above industry expectations of one year.

This assumes significance, as nearly 5 million terminals in the United States still require upgrades and U.S. EMV upgrades will be an important growth driver for VeriFone.

Brokerage's Commentary

But, the brokerage is not surprised by this decision of payment networks, as its checks showed most owners of gas station and convenient stores were not interested in upgrading their terminals over the next twelve months due to the high costs.

“However, we view the company's partnership with Gilbarco (gasoline fuel dispenser and retail petroleum technology provider) as a positive and think that this could enable VeriFone to improve its market penetration as it enters FY18,” analyst Saliq Khan wrote in a note.

But, the delay in EMV certifications in the United States is hurting the implementation process of higher margin attached services.

Shares of VeriFone closed Friday trading at $18.43.