Blackhawk Networks: Zacks’ Bull of the Day Play

I know it’s tough to be bullish about anything when it seems like the entire market is collapsing around you. This is usually where I throw out a bunch of inspirational quotes to get you all fired up and patriotic, as well as the obligatory Warren Buffet knowledge. But I’m going to spare you that for now and just have you think clearly. The one stock market mantra, or any market for that matter, that makes the most sense at the most basic level of understanding; Buy low, sell high. This is the “Buy low” part. That’s not to say that you may not be able to buy lower later, I’m just saying right now this is low.

And it’s low for everything. All different types of asset classes. Yields are very low with the 10 year below 2% today, the market had a mini-meltdown yesterday with extreme volatility. Yet today I’m telling you to do something crazy. Take money that you thought you were going to put under your mattress for a decade, pull it out of the pickle jar, close your eyes, get some guts and buy some stock while there’s blood in the street.

Today’s Bull of the Day, Blackhawk Network (HAWKSnapshot Report) may be the perfect buy in this imperfect market. HAWK is a Zacks Rank #1 (Strong Buy) in the miscellaneous Financial Services industry. Blackhawk Network Holdings is a provider of prepaid financial payments products for consumers and businesses. The company distributes gift cards, prepaid handsets and prepaid financial services products and is headquartered in Pleasanton, California.

Blackhawks distribution network spans 21 countries with over 400 distribution partners. They have a proprietary platform for activation, processing and settlement. From 2009 to 2013 the company had a CAGR on Operating Revenue of 26% and on EBITDA of 28%, making it a huge growth stock in the making. In 2013 alone, Blackhawk processed 242 million load transactions and $10 billion in load value.

There is significant market opportunity in this space. There has been a channel shift to third-party gift cards with the creation of “destination card malls.” There is expanding “self-use” of gift cards and growth in prepaid telecom products as well. New innovations allow for digitalization of gift cards and wallets through online and mobile use. Also, incentives and rewards are shifting from physical and travel products to gift cards. Blackhawk estimates the total addressable prepaid market at $221 billion per year, over 22 times the size of HAWK’s footprint today.

Analysts have been pretty bullish on HAWK’s potential as of late. In just the last week, two analysts have guided higher for the current year and next year. This pushed up consensus from $1.10 all the way up to $1.43 for the current year and up from $1.30 all the way to $1.93 for next year.

These bullish revisions have helped push the stock higher all along the way. After gapping up from $27 to over $30 to end September, HAWK traded as high as $35.50 before pulling back with the rest of the market over the last week or so. Still firmly above the 25 day moving average shifted by 5 days, the stock is locked in an uptrend and this pullback could be a great buying opportunity.


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