Another Tech Turnaround Story

Good morning!  Tech stocks seem to be taking off with several turn around stories early this year.  Here is another one we found with this same theme.

USA Technologies (NASDAQ – USAT - $2.37) has been around since 1992, but last week announced its first non-GAAP profit in 20 years.  The profits were just over $150,000 for 2Q13 after losing $1.8 million for 1Q13.  The stock has rallied about 15% on the news since, with fairly high relative volume of roughly 600,000-700,000 shares traded per session.  The charts also indicate a bullish signal in the short–term over the next 30 days.

USA Technologies is a unique company that offers wireless networking, cashless transactions, asset monitoring, and other similar services to smaller retail markets in the US and internationally.  The company’s main service is providing ePort Connect, a payment facilitation service, and additionally telemetry and machine-to-machine (M2M) services to monitor, control, and report the results of distributed assets containing electronic payment solutions.  The ePort Edge is a magnetic swipe-only cashless payment system with software ePort SDK, ePort QuickConnect, and eSuds, a solution for the commercial laundry industry that enables laundry operators to provide customers cashless transactions via credit cards, debit cards, and other payment mediums, such as student IDs.  Finally, the company manufactures and sells energy products which reduce and manage electrical power consumption of equipment such as refrigerated vending machines and glass front coolers. 

As evidenced by the financials, USAT appears primed for a continued turnaround with new products and other revenue generation.  It just released ePort Mobile, which allows vendors to accept debit and credit cards on smart-phones opening up the huge multi-billion dollar industry to USAT.  Additionally, the company has steadily increased repeat business with license and transaction fees.

Management has projects a 30% rise in revenue for FY13, and we believe that the stock could climb to the $3.50 level.

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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