Planet Payment: Investors Capitulate, Head-Faked and Time to BuyVW Staff
Via Prescience Investment Group.
We believe the panic liquidation by growth-oriented investors following Planet Payment Inc (NASDAQ:PLPM)’s (“Planet” or “the company”) revenue miss and guidance reduction is fundamentally misguided and has resulted in the opportunity to buy a dollar for $0.50 – and into a defensible, high- growth and margin, increasingly cash-generative, and recurring revenue business. The company trades at 3 year lows on investor capitulation, yet by our assessment, it is the most valuable it has been throughout its history.
We have followed Planet Payment Inc (NASDAQ:PLPM) for 3 years now because we believe it to have a dominant competitive position as a differentiated international payment processor, and to be the leader in one of the fastest growing, most lucrative areas of the payment space, dynamic currency conversion (“DCC” or “multi-currency payment processing”).
Planet Payment reported Q2’13 earnings
Planet Payment Inc (NASDAQ:PLPM) reported Q2’13 earnings on August 13, 2013, and on the surface the results appeared very concerning. Further, management reduced 2013 guidance and guided for 2014 revenue growth of 20%, a seemingly anemic target in light of the new, potentially game-changing markets the company is on the verge of entering this year.
However, an analysis of the company’s underlying operating metrics and a closer examination of the company’s explanations for the reduction reveal that Planet is setting up for a string of upside surprises. We believe the guidance revision was solely the result of delays in tech rollouts, which are likely to be resolved before year end. Such delays have no impact on Planet’s company’s earnings power.
We believe Planet Payment Inc (NASDAQ:PLPM) equity has an intrinsic worth of $4-6 per share, indicating 75-160% upside from current levels.
We have followed Planet Payment (PLPM or “Planet”) for 3 years now because we believe it to have a dominant competitive position as a differentiated international payment processor and to be the leader in one of the fastest growing, most lucrative areas of the payment space, dynamic currency conversion (“DCC” or “multi-currency payment processing”). Planet was founded in 1999 by current CEO Philip Beck, a former international banking and corporate attorney. The company has built a proprietary, currency-neutral payment processing technology platform that serves as an outsourced, revenue-enhancing infrastructure that banks and processors subscribe to through 3-5 year contracts. Once an acquirer or merchant is up and running on its platform, Planet generates recurring revenue by processing its payment transactions.