Why VeriFone Shares Plummeted


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronic-payment specialist VeriFone Systems (NYS: PAY) plunged 13% on Friday after its current-quarter guidance came in below Wall Street estimates.

So what: VeriFone's second-quarter results managed to top expectations, but a disappointing outlook for the third quarter is triggering concerns over its profitability going forward. Management cited foreign-exchange movements as the reason for the lackluster guidance, suggesting that its results are far more vulnerable to currency fluctuations than investors thought.

Now what: Management now sees third-quarter adjusted EPS of $0.68 to $0.70 on revenue of $495 million to $500 million -- versus Wall Street's expectations of $0.70 and $502.2 million -- but also maintained its full-year forecast. "We remain confident in our outlook for the year," CEO Douglas Bergeron reassured investors. "VeriFone is continuing to prove that widespread incumbency combined with market-leading innovation is a winning formula for the payments marketplace." But while today's plunge might offer a decent trading opportunity, VeriFone's still-heavy debt load and exposure to volatile foreign-exchange fluctuations make it a questionable long-term pick.

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At the time thisarticle was published Fool contributorBrian Pacamparaowns no position in any of the companies mentioned. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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