Seeking Alpha: PAX Global Technology - Exceptional Growth And Exceptional Performance

I liked PAX Global Technology (OTC:PXGYF) back in January, but I'm not going to pretend that I saw an 80% gain (for the Hong Kong shares) in the subsequent seven months as the expected outcome. Management has ramped up its distribution capabilities faster than I expected and is continuing to make the most of strong growth in the adoption of credit and debit cards in China and other emerging markets. With a significant focus on internal R&D and a stated goal of buying its way further into payment services and software, I believe investors can expect a long run of double digit free cash flow and good long-term stock performance.

Readers should note that buying these shares will take a little extra work. For liquidity reasons, I would encourage readers to buy the Hong Kong-listed shares (0327.HK) - most major U.S. brokerages now allow trading on major foreign markets and the commissions are not bad (though buying shares for a retirement account may not be allowed). I would be surprised if the company didn't ultimately pursue a sponsored ADR, but that may not happen for some time.

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PAX Global Technology - Exceptional Growth And Exceptional Performance

Seeking Alpha: A Clean Quarter Does Wonders For Global Payments

It's been a challenging year for Global Payments (GPN) shareholders, as the stock has chopped around between $42 and $50 on a series of "yes, but..." quarters and uncertainties regarding the company's ability to overcome a past security breach, evolving dynamics in the payment industry, and growth challenges overseas.

Maybe this fiscal first quarter will bring closure to some of those questions. Certainly the stock has been on a good run from around the start of September, and the Street seems to be happy with the accelerated share repurchase that was announced with this earnings report. I continue to be more bullish than average on Global Payments, and believe there could still be upside into the mid-$60's on ongoing growth in international markets.

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A Clean Quarter Does Wonders For Global Payments

Investopedia: U.S. Bancorp Is Strong But Needs Growth

This earning season is starting to feel like a broken record, or at least for the high-quality banks. Economic uncertainty has led many would-be borrowers to delay taking out loans, low interest rates make it tough to make money on the spread, and new regulations have hurt fee income and increased costs.

Add U.S. Bancorp (NYSE:USB) to that list of banks where the Street seems to be saying “yeah, we know you're good, but we want growth.” While this large super-regional bank looks like a very solid long-term banking holding, this stock may not really get going unless or until the economy picks up and/or investors shift funds from overheated sectors towards the financials.

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Investopedia: Global Payments Still Feeling An Uncomfortable Squeeze

Life still isn't easy in the narrow space between merchants and banks. Regulators have taken a much sharper pen to the fees that many players along the way can charge and earn, rivals continue to bludgeon each other for market share, and new entrants like Square threaten to upset the entire apple cart. That's led to less-than-spectacular performance from merchant acquirer and processor Global Payments (NYSE:GPN), as well as long-term concerns about the sustainability of what had previously been a pretty high-margin/high-return business model.

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Seeking Alpha: Gemalto Offers Growth With Security

When it comes to technology, France doesn't get much love. Apart from a handful of companies like Alcatel-Lucent (ALU), Dassault, and Bull SAS, it's pretty slim pickings for the most part. Gemalto (GTOMY.PK) is a notable exception, though, as this company is a world leader in smart cards and SIM cards and a leading player in the emerging near field communication (NFC)/mobile payment opportunity. Investors already prize Gemalto's growth potential, but these shares are worth a spot on investors' watchlists and may be more interesting to those who believe in a faster adoption curve for mobile payments and smart cards in the U.S. and China.

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Gemalto Offers Growth With Security

Investopedia: Heartland Payments Another Company Poised To Rebound With Small Businesses

Setting aside the ceaseless news media squabbling over whether the private sector is getting stronger (and doing so fast enough), there is a large ecosystem of publicly traded companies leveraged to a recovery in small and mid-sized businesses (SMB). As a large payment processor oriented towards the SMB category, Heartland Payment (NYSE:HPY) is one such company.

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Investopedia: How Much Better Can It Get At Discover?

By any reasonable measure, Discover Financial Services (NYSE:DFS) has come back strongly from the worst of the credit crunch - having broken $5 in the spring of 2009, this stock has very nearly reached $35 in the past couple of months. The company has certainly made progress getting more merchants and shoppers to use its cards and network, and it also seems to be picking up a little debit card share in the wake of new regulations. While these shares aren't overpriced, investors may want to ask themselves how much better they think a business can get before they buy shares.

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Investopedia: VeriFone Turning Into A Noisy Growth Story

Seemingly no growth story can go on for too long without seeing some doubts and controversy creep into the name. In the case of VeriFone (NYSE:PAY), it seems like the bears and bulls are increasingly at loggerheads. Bulls point to the ongoing upgrade and sales potential at traditional points like gas stations and retail stores, as well as the opportunity in the evolving mobile payment market. Bears argue, though, that organic sales growth isn't as strong as it seems, the upgrade cycle may be slow to develop and mobile could be as much a threat as an opportunity.

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Seeking Alpha: Investors Fret As Visa Rolls On

I don't want to trivialize a Department of Justice investigation, nor the possibility that the government will force Visa (V) to modify its post-Durbin strategy, but I'll argue that the odds are good that whatever it takes to get this worked out will look like a rounding error in a couple year's time. Although there's a chance that the move toward mobile payment may shake up the business a bit, the sheer power of Visa's network and the realities of consumption-oriented economies argue for a lot of durable value in this company.

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Investors Fret As Visa Rolls On

Investopedia: Is eBay A Trap?

Years of working as an analyst and investing my own money has made me suspicious of any tech stock that seems to offer both growth and compelling value. More often than not, the growth evaporates and that apparent value becomes a value trap. When looking at eBay (Nasdaq:EBAY) it's worth wondering why the Street isn't bidding this one up higher - is there that much doubt about its ability to keep its hold in e-commerce or build PayPal into an even more substantial player in payment processing? (To know about the technology industry, read A Primer On Investing In The Tech Industry.)

Respectable Fourth Quarter Numbers...  
eBay did more or less what it was expected to in the fourth quarter and a little more. Consolidated revenue rose about 35% as reported and 19% on an organic basis. Revenue growth was led by the payments business, up almost 28%, while the marketplace segment saw revenue growth of 16%. GSI chipped in $364 million in revenue this quarter.

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Seeking Alpha: MTN Group - A High-Quality Play On Africa's Potential

Africa really is the dark continent when it comes to investment options for American investors. While there are growing stock exchanges across the continent, there are few cross-listings in the United States and few liquid ADRs. While direct investment is always an option for the especially brave and ETFs like Market Vectors Africa (NYSE: AFK) or S&P Emerging Middle East & Africa (NYSE: GAF), I would suggest risk-tolerant investors take a look at MTN Group (Nasdaq: MTNOY.PK). Not only is MTN Group a well-run company in its own right, it's a potential direct beneficiary of rising incomes and standards of living across Africa.

The Basics
What MTN Group does is not very complicated. MTN is the dominant wireless service provider in much of Africa. It is an African version of Verizon (NYSE: VZ), America Movil (NYSE: AMX), or Vodafone (NYSE: VOD). MTN Group is presently licensed to operate in 21 countries and is further authorized to offer internet services in 13 countries.

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MTN Group: A High-Quality Play On Africa's Potential

Investopedia: Discover Still A Little Underappreciated

Discover Financial Services (NYSE:DFS) is really no longer the plucky up-and-comer. It's getting to the point where merchant acceptance of the Discover card is much more common than not, and the company is certainly a viable alternative to American Express (NYSE:AXP) when it comes to closed-loop systems. That said, the company still lags MasterCard (NYSE:MA) and Visa (NYSE:V) meaningfully, and investors have to balance out the potential benefits of future growth and M&A with the credit risks inherent to the business model.

A Solid End to the Year 

Discover's fiscal fourth quarter results ended the year on a relatively strong note. Revenue rose 13% as reported, with net revenue rising almost 23% from the year-ago level. Although the company's net interest income and margin was a little sluggish, that had a lot to do with student loans that the company acquired. Other metrics were pretty solid; receivables were up about 1%, credit card loans were up 3% and card sales volume was up 8% from last year.

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Investopedia: Will eBay's Numbers Match Its Business?

EBay (Nasdaq:EBAY) is a strange business in many respects. Along with Amazon (Nasdaq:AMZN), eBay has been out there almost since the beginning of the internet as a public phenomenon, and it has managed to avoid the malaise and irrelevance that has withered AOL (NYSE:AOL), Yahoo (Nasdaq:YHOO), and a host of businesses that have either taken low-ball bids or gone out of business altogether.


And yet, there are some oddities to eBay's numbers. Though eBay basically dominates online auctions and has built an impressive business out of PayPal, the company's returns on invested capital are not all that spectacular and the company's free cash flow margin has been in prolonged decline. The question, then, may not be so much about eBay's future growth prospects as it is about how much of that growth will ultimately benefit shareholders.

Satisfactory Third Quarter Results
All in all, eBay's third quarter report was fine. Reported revenue rose 32%, while organic revenue growth was more on the order of 18%. The company's marketplaces business saw revenue growth of 17%, while PayPal revenue grew 32% on a 14% increase in registered accounts and 31% increase in net payment volume.


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Investopedia: VeriFone Not Lacking In Growth Or Confidence

Consumers may be more reluctant to open up their wallets at retailers these days, but retailers and service providers are still quite willing to spend their own money on technology to make it easier for consumers to spend. To that end, payment solutions provider VeriFone (NYSE:PAY) is continuing to see excellent growth and momentum, and management is not lacking in confidence about the company's prospects.


A Strong Third Quarter
VeriFone has a solid reputation for surpassing analyst estimates and this quarter was no exception. Revenue jumped 21% from last year (8% sequentially), and the company beat the midpoint of analyst estimates by about 6%. Business in the U.S. was weak (on difficult comps), as North American sales fell 1% from last year. Growth was quite strong everywhere else, though - reported results from Europe jumped 56%, while Asia and LatAm grew 42% and 23%.

After the quarter ended, VeriFone completed its acquisition of Hypercom. Hypercom's last 10-Q (ended June 30, 2011) showed revenue of over $119 million and growth of 15% (though down about 13% in the Americas), but investors should remember that divestitures mean that the company will not reap 100% of that former business.



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Investopedia: Green Dot Looking Black And Blue

So far, prepaid debit card provider Green Dot (Nasdaq:GDOT) has followed a pretty familiar pattern - a successful IPO, some initial strength as big investment banks roll out coverage, and then a skidding share price as IPO buyers cash out and actual financial performance fails to match the lofty expectations of the IPO honeymoon. Even though Green Dot has disappointed some investors and there is still some regulatory risk, the stock seems to have skidded past a point where the fundamentals would support. 

Q2 Good, but Not Good Enough  
On just a casual first look, it might be hard to see why these shares have dropped to a 52-week low. Revenue rose 29% in the second quarter on a 23% increase in new activations and a 27% increase in active cards. Unfortunately, good as that was, it was below the consensus estimate for the second time in a row, and also represents ongoing deceleration in growth. 


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Investopedia: Can Visa Keep Pace In A Mobile Payment World?

It probably seems ludicrous to even challenge the idea that Visa (NYSE:V) is going to face any sort of relevant existential threat. After all, about 60% of the credit cards in this country have Visa's name on them and the cost of building up a rival network of thousands of banks and thousands more merchants is prohibitive.

And yet, maybe there are still threats investors should consider. Dinosaurs once ruled the world, too, but circumstances changed and they were not able to keep up with that change. The question for Visa is whether it can embrace and embed itself into the next generation of payment technologies.

A Second Quarter That Fits the Profile 

Visa has generally been a dependable grower and this fiscal second quarter was no exception. Net operating revenue rose almost 15% from the year-ago level, as card servicing fees climbed nearly 24%. Sequential revenue growth was less impressive (just 0.3%), though, as data processing and international transaction fees skidded on a sequential basis.

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Investopedia: Discover - A Cleaner Play On The Consumer Recovery

Sometimes it feels as though Congress and federal regulators are trying to bleed out major banks through dozens and dozens of regulatory papercuts. On top of that, there is still a lot of overheated rhetoric about the "evils" of large banks that hearken back to the populist movements of the late 19th century. That may all be an advantage for Discover Financial Services (NYSE:DFS), then, as this relatively purer play on credit cards may have fewer restraints on its day-to-day operations. 

A Solid Recovery Continues 

Like its banking cousins, Discover is continuing to benefit from a much-improved credit environment and that is funneling through to the bottom line. Growth was not necessarily all that impressive in its own right, though. Total revenue rose about 3% from last year (or about 4% sequentially), fueled by a 2% rise in net interest income (up 4% sequentially). Within that, card sales volume was up 7%, but credit card loans were down 3% while total loans rose on higher student loan numbers.

Credit was once again a good story. Write-offs dropped almost a full point sequentially and more than three points on a year-over-year basis. That fueled a lot of the outperformance this quarter, as the company reversed a year-ago loss and beat the average estimate by a wide margin.

Interestingly, fee income is going nowhere fast at Discover. That is interesting as Discover "under-fees" its customers relative to the likes of American Express (NYSE:AXP) or Capital One (NYSE:COF), and this would seem to be an opportunity for growth in the future. On the other hand, with regulators looking to hammer the fee income of companies ranging from AmEx to Mastercard (NYSE:MA) to US Bancorp (NYSE:USB) to Visa (NYSE:V), maybe Discover's low fee revenue is a point of positive differentiation.

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Feds Nickel And Dime The System

Apparently the federal government is not finished trying to tinker with bank and finance laws in the hopes of creating a consumer paradise. Unfortunately, the laws of unintended consequences are still in effect, and changes to interchange fees could create a lot of turbulence in the business of processing the millions of debit card transactions that occur every year.

The New Rules
Although nothing is final yet, on Thursday the Federal Reserve proposed significant changes to the debit card processing business. The most important part of the potential new rules concerns the interchange fees that banks receive every time a card is swiped. While transaction fees had been averaging about $0.44, or about 1.1% of the transaction value, the new rule would cap the fee at $0.12 per transaction. Clearly that is a major cut in a line of revenue that had been virtually pure profit for the banking industry. (For related reading, see Watch Out For Changes In Credit Card Agreements.)

Shoot First, Ask Questions Later
While there were expectations that limits of some sort were in the offing, investors were taken aback by the scale of the cut and blasted Visa (NYSE:V) and Mastercard (NYSE:MA), the two largest card network operators. Although these fees are not part of the companies' revenue (even though they set them), investors seem to be making the assumption that banks will push back hard on these networks and demand some sort of concessions in the fees they have to pay to help make up the difference. Apart from the fees, there is also a risk that new rules will come into play that will promote and increase competition in the network space and that could be a direct problem for these companies. 


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Time To Act Locally On Global Payments?

Fishing for turnarounds is a little like fishing for sharks - get a bit careless and you could find yourself bitten. That is a good warning to keep in mind when perusing the recent earnings report and stock action from Global Payments (NYSE:GPN). While this leading transaction processing service company has a lot of value-type characteristics, its poor margin performance and questionable guidance are warning signs. 

The Quarter That Was
Global Payments certainly did blow away expectations this quarter. Total top line growth was about 7% for this fiscal first quarter, with strong results in the U.S. and Asia somewhat offsetting a pathetic performance in Canada and Europe. That is a feeble performance relative to the likes of Visa (NYSE:V) or Green Dot (Nasdaq:GDOT) (to be fair, these aren't entirely straight up comparisons).

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Discover Shows A Better Credit Environment

Whether or not the recent news that recession "officially" ended a year ago has any meaning or not, it is hard to argue that improving consumer credit trends are not a positive for the economy. When reviewing Discover Financial Services' (NYSE:DFS) August quarter earnings announcement, there are definitely some encouraging signs of improvement.

The Quarter that Was
The number four credit card company - behind Mastercard (NYSE:MA), Visa (NYSE:V) and American Express (NYSE:AXP) - Discover, announced a solid earnings beat for its fiscal third quarter. Earnings were up 73% for the period, handily beating the consensus estimate. Transaction volume increased about 7% in the quarter, an interesting metric for both consumer spending and the company's relative market share. 


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