Imperial Capital Downgrades VeriFone (PAY) to In-Line

September 12, 2016 6:30 AM EDT
Get Alerts PAY Hot Sheet
Price: $15.79 -0.38%

Rating Summary:
    13 Buy, 15 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 29 | Down: 45 | New: 20
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Imperial Capital downgraded VeriFone (NYSE: PAY) from Outperform to In-Line with a price target of $18.00 (from $24.00) after the company recently updated its FY16 guidance and noted that FY17 revenue could decline by 3% year-over-year.

The analyst sees the following Key Factors Affecting the Business:

  1. The Turkey coup and the continued challenging political and macro-environment in Latin America has caused some customers to pause their device orders;
  2. EMV adoption is not picking up at the rate management (or for that matter, industry professionals) previously thought. As a result, 4Q16 revenues are projected to fall below company’s previous expectations and our previous estimate of $534mn.
  3. Although the company is experiencing slower than expected adoption in the small-andmedium business (SMB) and hospitality segments, management has been focused on improve its cost structure by exiting non-core businesses, strategically reducing headcount, and improving cash flow.
  4. However, if the company is unable to successfully improve its operations and navigate through these tough macro-environments, the stock could continue to be adversely impacted and fall below our price target of $18.
    1. In an interview with Bloomberg on 7/22/16, Verifone’s previous CEO, Doug Bergeron, noted that if PAY falls to $11-12, he may make a bid for the company.
      1. $11 would value the company at 6.3x our FY17E EBTIDA estimate of $323mn. $12 would value the company at 6.7x our FY17E estimate.

For an analyst ratings summary and ratings history on VeriFone click here. For more ratings news on VeriFone click here.

Shares of VeriFone closed at $16.73 yesterday.

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