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Goldman upgrades VeriFone, expects strong cash flow growth

Apr. 14, 2015 11:53 AM ETVeriFone Systems, Inc. (PAY-OLD) StockPAY-OLDBy: Eric Jhonsa, SA News Editor2 Comments
  • Believing there are "multiple drivers of growth" beyond an October deadline for U.S. retailers to implement EMV (chip-and-PIN) payment systems, Goldman has upgraded VeriFone (PAY +1.6%) to Buy, and hiked its target by $6 to $44.
  • Goldman sees plenty of room for margin/cash flow growth thanks to restructuring moves, supply chain rationalization, and a mix shift towards higher-margin U.S. sales. The firm also observes VeriFone trades at a 25% discount (on a forward P/E basis) to European rival Ingenico.
  • An 8% revenue CAGR is forecast for 2014-2017, and FY15 (ends Oct. '15) is expected to be "an inflection point" for free cash flow. Goldman sees the latter opening up "options for pursuing a more active capital allocation strategy with an increasing mix of M&A."
  • Stifel upgraded last week. Shares are ~$3 away from a 52-week high of $38.63.

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