Is VeriFone becoming a Dinosaur?

We attempt to look into whether VeriFone should be owned.

Now we know VeriFone shares caught a pump and a dump back when Apple Pay was making its rounds. Investors didn’t know whether to crap or go blind metaphorically speaking and apparently they still don’t.

 

Let us take a look at a few segments of VeriFone’s business.

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We think VeriFone is a sell.

The cab business. Oh, wait they are losing market share. To whom? Uber. Oh wait, VeriFone has an answer. They bought a Taxi-hailing app,

Verifone Taxi Systems announced Wednesday that its recently acquired cab-hailing app Curb will soon launch in New York with an advance-booking feature—the first of its kind among the city’s myriad ride-hailing apps.

Well, at least they were original. Not. Who doesn’t like a smelly cab and a driver that you can’t communicate? Can I see a show of hands?

I think we can safely say this revenue stream of hardware (more on that later) isn’t going to be a blockbuster for VeriFone. I don’t see the traditional taxi business model throwing a right hook that will put Uber to the mat. I will take side bets on this prediction if you truly believe in the old yellow taxi.

 

Let’s look into the C-store segment. Ok, they have the VeriFone Ruby platform. The same old Ruby POS terminal they have had for years. You have seen them. They are not glamorous but are a workhorse in the industry. Just how many new C-stores are being built?  Not that many actually. Remember when there was an auto parts store being built on almost every block?  Remember when a pharmacy seemed to pop up about every half a block?  Well, C-stores (Convenience stores if you have not caught on by now) were the ones that built like crazy in between auto parts stores and pharmacies booms.  The smart C-store owners sold off their under-performing stores to the Walgreens and CVS’s. They mowed them down and now Grandpa only drives 4 minutes to get his Viagra.  So we are faced with upgrades to existing equipment for now. Anyway enough nostalgia and Grampy talk. That was getting uncomfortable.

 

We are left with what? Upgrades for VeriFone. Not exactly the home run we are looking for huh?  Unless I am missing some under the radar business that is up and coming…. Oh wait, the gig economy. But they don’t use the hardware VeriFone sells but nonetheless an up and coming economy. We really don’t have a lot to get ultra excited about when we think of Verifone. Symbol PAY by the way.

I don’t really see getting paid with PAY.

I’m not saying the stock price cannot move up. But whew the VeriFone chart looks crappy at almost any time interval unless you are day trading.  I expect more channel stuffing from VeriFone like they pulled many years ago as these guys are an aggressive breed when it comes to making the quarter.

 

SAAS Software as a service is here. Hardware is here. How many hardware companies have you seen lately producing huge returns? Apple? Dell?

Until VeriFone can prove itself and get less dependent on hardware and increase it SAAS segment I see no catalyst here. Flea markets are huge on Facebook , but they are not “Point of sale” savvy.  Let’s face it.  I welcome rebuttals to the thesis I have laid out and really would like to know an opposing view as I need some reason to own this name.

 

I think the wise move might be to avoid PAY for now and maybe even short it on pops if you are as aggressive as PAY number crunchers.  At least till they right hook Uber. Grin.

 

Stay Nimble