USA Technologies: Riding the "cashless" wave

Posted May 9th 2007 9:30AM by Hilary Kramer
Filed under: Hilary On Stocks

If you often find yourself at your office vending machine without any cash, you should love a company like USA Technologies (NASDAQ: USAT). This Pennsylvania-based company makes network devices to enable non-cash payments -- e.g., using credit cards for vending machines -- as well as remote monitoring and data-reporting devices.

In an automated age when we are increasingly moving away from cash, and using our credit cards more and more often, a company like USAT has enormous potential. Its most recent big announcement will give you a sense of why I like this company so much. Last month, USAT went public with news of a partnership with Mastercard that would enable Mastercard customers to set up their credit cards for use with vending machines, through a wireless, contactless "ePort" technology.

In other words, when you need a Snickers bar you can pull out your card, wave it in front of the scanner, and bill your card for that tasty snack. The Coca-Cola Company (NYSE: KO) announced it would be installing this technology on its vending machines; if you think about how many of these machines exist across the country, you start to see why USAT's products will be in increasing demand in the coming years.

In addition to its non-cash technologies, USAT also offers energy-management devices to cut down on the amount of electricity consumed by refrigerated vending machines and glass-front coolers. If our age is increasingly automated, it's also increasingly energy-conscious, and USAT will stand to profit from its strengths in this area as well.

USAT has yet to turn a profit, but I think this is a company with a great deal of upside, and I'd recommend it for investors who can handle a bit of risk.

Type of stock: A leading manufacturer of payment devices for vending machines, laundry machines, business service centers, and many other automated devices.

Price target: This one is currently trading at $53, near its 52-week high, but I think it's going to trend upward from here, especially as more customers sign on to its new Mastercard venture and investors start responding to increasing revenues. Given the uncertainty of its profitability in the short term, it's only for investors who can handle some risk, but I think it's one to buy now.

Hilary Kramer is a financial editor and money coach for AOL and an authority on investing. Visit her at www.hilarykramer.com.

Tags: Hilary on stocks, HilaryOnStocks, KO, USAT