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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, one analyst contends.
Ingenico "is offering free, low-end terminals through at least one channel partner as part of its aggressive push" into the U.S. market, Gil Luria, an analyst with Wedbush Morgan Securities, wrote in research notes published Monday. At the same time, terminal demand in the U.S. is slowing because of a "reduction in business starts, especially restaurants."
In the long term, VeriFone could increase sales to gas stations because of 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, and the gas-station market accounts for only 8% to 9% of VeriFone's revenue, the note says.
Hypercom could get a profitability boost from Thales e-Transactions, a payment-software maker it acquired last year, Luria wrote.
He also wrote that Ingenico, which made an unsolicited bid of $6.25 per share for Hypercom in February, still could be interested in the company. Ingenico rescinded the offer because Hypercom was acquiring Thales e-Transactions, which Ingenico said it did not want.
Luria reiterated his "hold" rating on both U.S. companies' stocks and left his per-share 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 per 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 had been below $1 for 30 consecutive days. The company has six months to raise and hold the price above that threshold. Hypercom's stock closed at $1.48 per share on Tuesday. ATM
