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Hawkish Guidance

Stock (Symbol)

Blackhawk Network (HAWK)

Stock Price

$42

Sector
Financial
Data is as of
October 19, 2015
Expected to Report
Feb 24 – Feb 29
Company Description
blackhawk_featuredBlackhawk Network Holdings, Inc. (Blackhawk) is a prepaid payment network. The Company offers a range of prepaid gift, telecom and debit cards, in physical and electronic forms, and related prepaid products and payment services in the United States and 21 other countries. It operates in two segments: US Retail and Incentives & Rewards, and International Retail. US Retail and Incentives & Rewards segment consists of the various operating segments of its United States retail products, online channel, secondary card market and incentive and reward solutions and derives revenues from sales of prepaid products to consumers at its United States retail distribution partners, online and through its card exchange and prepaid products to consumers through business clients. Its International Retail segment consists of the various operating segments of its geographic regions and derives revenues from sales of prepaid products to consumers at its international retail distribution partners. Source: Thomson Financial
Sharek’s Take
David SharekBlackhawk is expected to have single digit profit growth ahead as it moves away from higher-margin physical gift cards to lower-margin digital cards and international cards. Blackhawk gift cards, financial services cards, and pre-paid phone cards are in over 180,000 retail locations such as Home Depot, Disney, Lowe’s, Target, Starbucks, Staples, and Macy’s among others. It even does incentive programs. In an effort to expand, HAWK makes deals overseas where it shares part of the sale (and profits) to the partner overseas. Digital gift cards are low margin too.  HAWK has lost its momentum too, dropping after earnings then not rallying when the market did. I will sell HAWK, from the Aggressive Growth Portfolio, but hold it in the Growth Portfolio as this company just a 16 P/E compared to its 18% Expected Annual Growth Rate.
One Year Chart
HAWK_2015_Q4Note the stock lost momentum after it reported earnings — a telling sign. I feel this stock won’t do much during the next few months. P/E of 16 is good, especially next to the Est LTG of 18% per year. Still, qtrly earnings estimates for the next 4 qtrs look like this: 7%, 6%, 5%, 3%. HAWK did beat the 30 cent profit estimate by 5 cents last qtr, so these numbers could be underestimating HAWK’s potential. This stock doesn’t look great right now, I wouldn’t have it as a major position in a portfolio.
Fair Value
HAWK_2015_Q4_PHAlthough I’m selling the stock from one portfolio, I’m continuing to hold it in another as stock has good upside to its 2016 Fair Value of $52. Investors Business Daily spun the idea that HAWK could get acquired, by a company like PayPal.
Bottom Line
HAWK_2015_Q4_10yrBlackhawk is a new and unique financial services company that has already developed a vast network. But profit margins might be eroding due to the natural transition of the business model.

HAWK is ranked 21st of 28 stocks in the Growth Portfolio Power Rankings. It will be sold today from the Aggressive Growth Portfolio Power Rankings, and I will put Facebook (FB) in its place.
Power Rankings
Growth Stock Portfolio

21 of 28

Aggressive Growth Portfolio

N/A

Conservative Stock Portfolio

N/A

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