The U.S. payment terminal companies Hypercom Corp. and VeriFone Holdings Inc. will face increased earnings pressure this year as the global economy slows and a French rival, Ingenico SA, tries to expand in the United States, according to Gil Luria, an analyst with Wedbush Morgan Securities.
Ingenico "is offering free low-end terminals through at least one channel partner as part of its aggressive push" into the U.S. market, Mr. Luria wrote in research notes published Monday. At the same time, terminal demand in the United States is slowing, because of a "reduction in business starts, especially restaurants."
In the long term, VeriFone could increase sales to gas stations, from falling gasoline prices and a 2010 compliance requirement to improve security, he wrote.
However, any gain in revenue from this requirement may not appear until next year, the note said, and the gas station market accounts for only 8% to 9% of VeriFone's revenue.
Hypercom could get a profitability boost from Thales, a payment software maker it acquired last year, Mr. Luria wrote.
He also wrote that Ingenico, which made an unsolicited bid of $6.25 a share for Hypercom in February, could still be interested in the company. The offer was rescinded because Hypercom was acquiring Thales, which Ingenico said it did not want.
He reiterated his "hold" rating on both U.S. companies' stocks and left his price targets unchanged at $4.50 for VeriFone and $3 for Hypercom. However, he cut his full-year earnings estimate for Hypercom, which he now expects to post a loss of 7 cents a share, instead of a profit of 8 cents.
Hypercom said last week that it had received notice from the New York Stock Exchange that its stock may be delisted, because the average closing price has been below $1 for 30 consecutive days. The company has six months to raise and hold the price above that threshold.
By midday Monday, Hypercom's shares had dropped 1.53% from Friday's close, to $1.29. VeriFone's shares had dropped 0.75%, to $5.26.