VeriFone Holdings (NYSE: PAY) makes and services transaction automation systems that enable electronic payments between consumers, merchants and financial institutions. Products include point-of-sale software and terminals, smart card/check readers, receipt printers and Internet commerce software. The firm also makes gas station electronic payment systems that combine card processing and fuel dispensing. Further, it offers a range of client services and customized application development. About 60% of the firm's revenues are generated from customers outside the U.S.

The company pleased the Street last week, when it appointed an interim CFO to replace an officer who resigned following a probe into company accounting errors. VeriFone corrected its books the same day, by deleting $70 million in previously reported fiscal 2007 profits. Management also issued a favorable forecast, guiding Q308 EPS to 34-35 cents (28 cent consensus), Q3 revenues to $256-$258 million ($248.3M consensus), Q408 EPS to 36-39 cents (30 cent consensus), Q4 revenues to $260-$268 million ($255.2M consensus) and FY09 EPS to $1.35-$1.55 ($1.14 consensus). The CEO pointed out that the firm was seeing excellent growth internationally, particularly in emerging markets.

VeriFone Holdings (NYSE: PAY) is recently down $22.37 to $25.68 after announcing it will restate 1Q, 2Q and 3Q results related to in-transit inventory. PAY's technology enables electronic payment transactions and value-added services at the point of sale. Wachovia says, "we would be buyers into the weakness." PAY set a $200 million private placement of equity on Nov. 27; the sale was expected to close on December 11.

Dow Jones reported on November 30 that PAY's Chairman Douglas Bergeron sold 43,300 shares in four separate sale transactions on November 26, 2007. PAY option volume was heavy on November 29, with 6,505 contracts trading. PAY January option implied volatility of 96 is above its 6-month average of 41 according to Track Data, suggesting larger risk.

Daily Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

MOST NOTEWORTHY: Circuit City, Best Buy, COTT Corp and o2 Micro were today's noteworthy initiations:

• Wachovia started shares of Circuit City Stores Inc (NYSE: CC) with a Market Perform rating, citing low visibility into near-term fundamentals and low conviction in EPS.
• The firm also started shares of Best Buy Incorporated (NYSE: BBY) with a Market Perform rating, citing low visibility into holiday sales and product margin trends and valuation.
• Gabelli started COTT Corporation (NYSE: COT) with a Hold rating, as they believe the company's Q3 was disappointing. The firm thinks COTT lacks pricing power, and would look for margin improvement and successful non-carbonated soft drink penetration from the company before recommending the stock
• Thomas Weisel started shares of o2 Micro International Limited (NASDAQ: OIIM) with an Overweight rating and $24 target. The firm believes the company is in good position to compete in the high growth markets of power management, advanced lighting and security and surveillance

• Goldman started shares of Heartland Payment Systems (NYSE: HPY) with a Buy rating and VeriFone Holdings, Inc (NYSE: PAY) and Total System Services Inc (NYSE: TSS) with Neutral ratings.
• Gasco Energy Inc (AMEX: GSX) was initiated with an Outperform rating at Morgan Keegan.
• Morgan Joseph resumed coverage of Stage Stores Inc (NYSE: SSI) with a Hold rating.

If you are like most of us, you can probably count on one hand the number of times you have paid cash for something recently. Secure electronic payment technology is ubiquitous. The outfit that has installed more such systems than any other company in the world is headquartered in San Jose, California.

VeriFone Holdings (NYSE: PAY) makes and services transaction automation systems that enable electronic payments between consumers, merchants, and financial institutions. Products include point-of-sale software and terminals, smart card/check readers, receipt printers and Internet commerce software. The firm also makes gas station electronic payment systems that combine card processing and fuel dispensing. Further, it offers a range of client services and customized application development. VeriFone was once a division of Hewlett-Packard (NYSE: HPQ).

The company surprised the Street last week, when it reported fiscal Q3 EPS of 42 cents and revenues of $231.9 million. Analysts had been looking for 40 cents and $226.7 million. Management also guided Q4 EPS to 41-42 cents (41 cent consensus), Q4 revenues to $231-$233 million ($235.2M consensus) and FY07 EPS to $1.59-$1.60 ($1.56 consensus). Wedbush Morgan subsequently reiterated its "strong buy" recommendation on the issue. The stock popped above 200-day moving average support on the news and then passed into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with six "strong buys" and two "holds." Analysts expect a 20% growth rate through the next year. The PAY Sales Growth rate (57.13%) and EPS Growth rate (75%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 82% of the outstanding shares. Over the past 52 weeks, the stock has traded between $27.20 and $42.72. A stop-loss of $34.90 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.