On Dec 24, Zacks Investment Research downgraded
) by two notches to a Zacks Rank #4 (Sell) from a Zacks Rank #2
Why the Downgrade?
Despite upbeat earnings in third-quarter 2013, earnings
estimates for Xoom have remained stationary on the back of
stagnant growth momentum, higher expenses and faltering guidance
for fourth-quarter 2013.
Additionally, this online money transfer service provider
underperformed the year-to-date Nasdaq index, which posed a
growth of 30.2% against Xoom's 9.5%.
On Oct 22, Xoom reported third-quarter 2013 operating earnings
per share of 6 cents, which rebounded significantly from a loss
of 31 cents. Results also outpaced the Zacks Consensus
Estimate of a loss of 9 cents.
The top line surged 62.3% over the prior-year quarter based on
significant growth in transactions, gross sending volumes as well
as active and new customers. However, operating expenses
increased 29.5%, which along with higher interest and other
expenses, restricted margin upside.
Xoom's focus on international expansion and increased presence
on mobile devices for digital remittances are yet to show
results. This is due to the operating challenges faced due to
intense competitive pressure in the peer group, which also hikes
the risk for new-customer accretion.
Subsequently, the company is expected to deliver operating
loss per share between 1 cent and 3 cents in the fourth quarter
of 2013, while revenues are projected in the band of $30.2−$31.2
million, thereby raising caution for the upcoming quarters.
Meanwhile, the Zacks Consensus Estimate for 2013 and 2014
remained intact at 11 cents and 18 cents per share, respectively,
in the last 60 days. No upward revision in estimates was
witnessed for both the years.
Other Stocks to Consider
While we prefer to avoid Xoom for the time being,
better-ranked stocks in the financial transactions sector include
Heartland Payment System Inc.
Higher One Holdings Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
HEARTLAND PAYMT (HPY): Free Stock Analysis
MASTERCARD INC (MA): Free Stock Analysis
HIGHER ONE HLDG (ONE): Free Stock Analysis
XOOM CORP (XOOM): Free Stock Analysis Report
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