VeriFone Systems Shares Downgraded To Neutral At BTIG

Following 2017's robust first-quarter results reported by VeriFone Systems Inc PAY, the stock rallied and has now risen more than 35 percent since mid-October 2016.

BTIG’s Mark Palmer downgraded the rating on the company from Buy to Neutral.

Further Substantiation Needed

“We believe additional upside in the stock may be capped in the near term as investors seek further substantiation of management's expectations regarding EMV adoption and market acceptance of the company's new product,” the analyst explained.

Visibility into VeriFone Systems’ earnings trajectory has been limited. Combining that with questions regarding the company’s adoption of EMV-compliant devices in North America against the backdrop of liability shifts announced in 2016, Palmer still believes the company’s long-term story remains intact. Furthermore, the analyst sees the stock as having become “oversold and very inexpensive.”

“In light of the recent rally in PAY’s shares, we believe the shares are fairly valued at this point, and that additional substantiation of management’s expectations of a 2H17 ramp-up in EMV adoption and of traction gained by its next-generation devices, Carbon and Engage, will be needed before a fuller valuation would be merited,” the analyst went on to say.

Q1 Beat

For Q1:17, VeriFone Systems reported adjusted EPS of $0.21, ahead of the consensus and the estimate. The adjusted net revenue for the quarter also beat expectations, coming in at $457 million.

Given VeriFone Systems’ strategy to reposition the company from being a “box shipper” to a firm that provides higher margin, “commerce-enabling” services, Palmer said the pace of this transition is one of the factors being monitored.

In that context, the company reported a 5.7-percent sequential decline in its services revenue to $188.5 million, below the estimate of $193.2 million.

At last check, shares of VeriFone were down 1.23 percent in Friday's pre-market session, seen at $20.10.

Related Link: Identifying Key Positives And Risks For Verifone After Its Q4 Report ______ Image Credit: By MC2 Honey Nixon - https://www.cnic.navy.mil/navycni/groups/public/@pub/@southe/@guantanamobay/documents/document/cnic_048727.pdf, Public Domain, via Wikimedia Commons