BTIG Starts VeriFone (PAY) at 'Buy'; Positive on L-T Goals Amid Recent Setbacks
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BTIG is starting coverage on VeriFone Systems (NYSE: PAY) with a Buy rating and price target of $21.
- Analyst Mark Palmer said today,
While shares of the point-of-sale electronic payments company have been cast aside by investors¡V the stock is down almost 39% year-to-date and trades at just 9.8x FY17 consensus earnings per share ¡V following two straight disappointing earnings reports that sent the stock tumbling, we believe the market opportunity for PAY in the longterm remains intact. As such, we think the pullback in the company's shares represents a buying opportunity for investors with reasonable investment horizons and point to its Investor Day in January as a catalyst.
- We appreciate that the primary reasons for the sell-off in PAY shares ¡V the slower-than-expected adoption of chip-card readers compliant with the EMV standard, particularly among small- and
- medium-sized businesses in the U.S., as well as macro softness in certain markets in which the company operates ¡V have resulted in low visibility in the near-term. However, we believe the market is
- undervaluing PAY's position as part of an effective duopoly with Ingenico (ING FP, Not Rated) in the credit- and debit-card terminal space in which secular tailwinds still prevail.
- While PAY continues to face challenges overseas ¡V in addition to ongoing weakness in Latin America, the coup attempt in Turkey on July 15 caused a freeze-up in a key market for the company's products
- ¡V we believe these issues are already more than baked into the stock price even as it is likely that stability will return over time. Moreover, it appears more a matter of when rather than if revenues and earnings pushed off by slower-than-expected EMV adoption will be realized.
- We were not surprised when reports about private equity interest in PAY emerged a few months ago as its healthy free cash flow and attractive valuation make it an interesting acquisition target.
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