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Blackawk Has Its Pros and Cons

Stock (Symbol) Stock Price

Blackhawk Network (HAWK)

$45

Data is as of Expected to Report Sector

July 27, 2015

Oct 6 – Oct 12

Financial

Sharek’s Take
Blackhawk does gift cards, financial services cards, pre-paid phone cards and incentive programs for Home Depot, Disney, Lowe’s, Target, Starbucks, Staples, Macy’s among others. David SharekHAWK, a recent addition to the Growth Portfolio and Aggressive Growth Portfolio, has its pros and cons.  First the company beat the street last quarter and the stock broke out to an All-Time high. Great! But since then the stock’s failed to move higher. One of the reasons is profit growth later in the year is expected to slow into the single digits. This pre-paid gift card company makes good profit off physical gift cards, but the electronic ones have lower profit margins, and that’s where the market is headed. Also, Blackhawk is expanding into China and India and will have to use partnerships to do so, which means splitting the profits. At 20x earnings, HAWK is a decent value considering its Est LTG is 21% per year, but maybe the gift card section in local stores in the US is nearing saturation and to expand overseas the company will have to rely on other parties which means less profit. I’m at a wait-and-see period with this stock now, and may sell some shares if HAWK breaks down.
One-Year Chart
HAWK_2015_Q3Great profit growth, solid stock chart, but that +8% profit growth 2QtrsOut looms large. It looks like HAWK will beat but I’m guessing 12% profit growth?
Earnings Table
HAWK_2015_Q3_EPSProfit growth was a sparking 124% last qtr on a 31% increase in sales.

HAWK beat by just 5 cents, disappointing because it beat by 16 cents and 11 cents the prior two qtrs.

Annual Profit Estimates
increased, but not by that much.

Quarterly profit growth is set to slow dramatically later in the year, but I feel management will beat these estimates by a little.

Fair Value
HAWK_2015_Q3_PHJust a P/E of 25 would take this stock up 27%. Blackhawk Network is a good value with the current market conditions giving growth stocks high multiples.
Ten-Year Chart
HAWK_2015_Q3_10yrTen-year chart looks great, profit growth looks good (but slowing). I like this breakout after the long basing period.
Power Ranking Bottom Line
Growth Portfolio

7 of 23

Blackhawk is a new financial services stock that seems to be on to something new and unique. But like anything, competition could erode profit margins and kiss that rapid profit growth behind. I like the stock broke out after earnings — momentum is with it — but if that turns the other way I will reduce my position.

HAWK is ranked 7th of 23 stocks in the Growth Portfolio Power Rankings and 5th of 10 stocks in the Aggressive Growth Portfolio Power Rankings.

Aggressive Growth Portfolio

5 of 10

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