VeriFone Is Ready to Pay Investors After Paying for Its Mistakes
Updated to include information in paragraph three.
NEW YORK ( TheStreet) -- It wasn't long ago the prevailing question concerning payment technology company VeriFone
The stock closed Tuesday at $33.96, up 0.27%. The company reports earnings Thursday.
The stock was not a compelling buy ahead of the earnings report because:
1. The shares had already produced strong gains despite the emerging threats of mobile payments.
2. We needed more clarity with the progress of the company's transition from hardware to a software/services platform.
3. VeriFone's operating margin had been under pressure due to rising expenses.
The payments industry is in transition. VeriFone, which has been the market leader for quite a while, has had a tough time embracing some changes -- particularly as the market shifts to mobile payments.
The growing popularity of person-to-person payment platforms from eBay's
To counter the increased competition, last September eBay picked off payment services system Braintree for $800 million, a company that processed well over $12 billion in transactions per year.
Then there's Apple
All told, VeriFone's strong bounce from its 52-week low has been impressive. It's no coincidence the company's recovery began when Paul Galant was installed as CEO last September. Galant's experience as head of the Enterprise Payments and Cards unit at Citigroup
In a short period of time, Galant has transformed the company from an antiquated hardware platform to one that is now focused on improving the payment experience by adopting a software/services oriented model.
This is an important move given that eBay has partnered with NCR to integrate PayPal's mobile services, which will enable customers to pay for goods and services using their smartphones. I expect VeriFone to strike similar deals. But before these moves will matter, the company has to figure out a way to reverse its declining revenue.
When it reports Thursday the Street will be looking for 33 cents in earnings per share on revenue of $443.42 million, which represent revenue growth of 3.2% year over year. Although earnings are expected to decline 21% this quarter, this has more to do with the company's ongoing business transition to new platforms, which requires increased capital spending.