VeriFone Systems Inc (PAY) Stock Becomes a Falling Knife

VeriFone Systems Inc (NYSE:PAY) dropped a bombshell late Tuesday with some ugly quarterly results and a disappointing outlook, sending PAY stock down 30% in Wednesday’s premarket trading.

VeriFone Systems Inc (PAY) Stock Becomes a Falling Knife

The payments technology company missed Wall Street estimates by a wide margin, took a hatchet to its earnings forecast and announced a restructuring  program that includes layoffs.

PAY stock is struggling amid the company’s soft media sales, more intense competition and a slowdown in some emerging markets. VeriFone also is rebuilding its China franchise.

Bears Maul PAY Stock on Earnings, Forecast

For its fiscal second quarter, VeriFone earnings tumbled to $2.9 million, or 3 cents a share, down from $17.6 million, or 15 cents a share, a year earlier. On an adjusted basis — which is what the Street cares about — earnings rose to 47 cents a share from 44 cents a share, according to a survey by Thomson Financial.

That doesn’t sound too bad, except that analysts on average were expecting earnings to come in at 52 cents a share. Big miss.

Revenue increased 7.3% to $526 million. The Street, however, was looking for $530 million.

Worst of all, Verifone slashed its guidance dramatically. Management now expects full-year per-share earnings of $1.85 on revenue of $2.1 billion. Their prior forecast was for EPS of $2.21 and $2.24 on revenue of $2.15 billion to $2.17 billion.

As for the analysts, they were modeling per-share earnings of $2.23 on $2.2 billion in revenue.

The bottom line here?

PAY’s results were a disaster, and VeriFone stock has become a falling knife for a number of reasons, including a growing horde of competition in an increasingly easy-to-crowd space.

Bulls need to seriously reconsider their positions.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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