VeriFone Systems Inc. is now more susceptible than ever to a private equity takeover as it has declined the most if compared to all the other large US stocks available in the market. The company has actually fallen the most of all the Russell 100 Index stocks. The earnings projection of 2013 for VeriFone has been disappointing as well and that prompted a single day decline of 43%. The shares however trimmed the loss a bit (By 6%) on 12th March; still, the situation is not good enough for the company.
According to Wedbush Inc., VeriFone’s cash production makes it a lucrative target for the private equity firms. These private equity firms use cash generated by acquired companies for paying off debt which funded the transaction. A drop in stock value of VeriFone means that the valuation relative to free cash flow is two-thirds cheaper than its rival company in making credit card terminals – Ingenico. As stated by the Analyst of Wedbush, Gil Luria, VeriFone’s cash flow has been pretty stable and the private equities will definitely see value in buying the company and thereby cleaning up the mistakes that it had made earlier. Gil added that if the business can be fixed, VeriFone can actually grow at the industry rates.
The spokesman for VeriFone, Andy Payment declined to make any comment on the takeover prospects of the company. He added that the company has a policy not to speculate.
The market value of VeriFone has tumbled to $2.2 billion as the stocks retreated by 30% in this year. At last week, the shares closed at $20.68 per share. That’s pretty close to the lowest figure in last 32 months of $18.24. The earning for the 2nd quarter of 2013 is expected to be between 45 and 50 cents per share for the company. This is way below the estimated 80 cents per share by the analysts.
Many feel that VeriFone has failed to market the products outside the US market. However, there is still scope to rectify this mistake in the coming quarters, as stated by the Analyst of Raymond Jones, Wayne Johnson.
The main business of VeriFone is to provide in-store terminals which process credit and debit card payments. VeriFone, off late, has been challenged by other companies such as PayPal, Square Inc., Bank of America Corp., Groupon Inc. etc.