VeriFone Systems Inc. (PAY:US), the largest maker of credit-card terminals, fell the most since March 2009 after an analyst again questioned the company’s growth and said it has poor free cash flow.
VeriFone fell 15.5 percent to $38.03 at the close in New York. The stock has dropped 31 percent from April 29, the day before Deutsche Bank Securities analyst Bryan Keane downgraded the San Jose, California-based company, through today.
Yesterday VeriFone issued next-quarter revenue and earnings guidance that missed some analysts’ expectations.
“The company put out even weaker free cash flow number than in the first quarter,” Keane said in a telephone interview today. “It’s unclear if free cash flow is going to materially improve.”
VeriFone generated $50.2 million in cash from operating activities in the six months ended on April 30, down from $68.8 million in the same year-ago period.
Firms including Goldman Sachs Group Inc. and Citigroup Inc. recommended today that investors buy the stock on weakness.
“Their business is growing pretty decently, they’ve just set expectations too high,” Gil Luria, an analyst at Wedbush Securities Inc., said in an interview.
Keane downgraded VeriFone to a sell rating from a hold on April 30, lowering his 12-month target price to $40 a share from $44. In a report that day, he questioned the company’s method for reporting organic growth.
“In our view, organic growth is being inflated through acquisitions,” he wrote in the report. Keane added: “The more appropriate method to calculate organic growth is to look at all acquisitions as if they were owned in both comparable periods.”
VeriFone Chief Financial Officer Robert Dykes said the company stood by its estimates.
“One analyst’s taken upon himself to paint a short story of the company,” Dykes said in an interview today. “He’s just misinterpreting data and making an issue where there isn’t one. We did 15 percent organic growth. All the other analysts but Bryan are happy with our analysis.”
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