Stifel Upgrades VeriFone, Sees 'Impressive EMV Success Lost In Translation'

In a report published Tuesday, Stifel analyst Christopher Brendler upgraded shares of VeriFone Systems Inc (NYSE: PAY) to Buy from hold with an unchanged $42 price target as the company has seen "remarkable" recent success with EMV terminal upgrades that has yet to be fully appreciated by the investment community.

"We believe the strong recent results are indicative of market share gains in the key SMB vertical and with the EMV tailwind much longer in this market, we now think the EMV benefit persists into 2017," Brendler wrote. "With the stock underperforming over the last 6 months despite accelerating growth, we believe shares will revalue as FX normalizes and EMV-powered organic growth shines."

Brendler continued that foreign exchange headwinds are "masking" top-line traction and the company isn't getting enough credit for its execution. With organic growth accelerating to 17 percent last quarter and the nationwide conversion underway, the analyst is "increasingly confident" in the company's outlook.

Brendler added that a previous Hold rating was based on a lack of confidence surrounding post-EMV top line, uncertainty about tangible restructuring benefits and believe that valuation is "relatively full." However, the stock is now relatively cheaper despite the company delivering two stronger-than-expected quarters and demonstrating restructuring success.

Bottom line, foreign exchange woes will hurt the company in 2015, but this sets up a potential for easier comps in 2016.