Until the latest quarter, VeriFone had met or beaten analysts' quarterly estimates for two years.
Analysts on Thursday rejected the company's argument that its problems came from the weak economy. While macro conditions may have had an impact on business in the quarter, the global economy has had far less of an impact on peers such as NCR Corp and Micros Systems, said Wedbush analyst Gil Luria, who cut his price target to $22 from $33.
Citi Research analyst Philip Stiller cut his rating on the stock to "neutral" from "buy" and price target to $23 from $47.
"(VeriFone) has a long uphill battle to rebuild trust and belief in the company on top of ongoing execution issues in a rapidly changing payments landscape," he said in a note.
VeriFone warned late on Wednesday that it expected its first quarter adjusted earnings to be 47 to 50 cents per share on revenue of $424 million to $428 million. That is well short of the average analyst profit forecast of 73 cents per share on revenue of $492 million.
The company forecast an adjusted profit of 45 to 50 cents per share in the current quarter, well below the average analyst forecast of 80 cents, according to Thomson Reuters I/B/E/S.
One of the company's biggest problems was the cancellation of the Washington, D.C. contract. VeriFone announced last year that it won a $35 million-plus contract to install and support payment systems in 6,500 taxis in the capital.
The contract was canceled in November after the Contract Appeals Board ruled that the process that ended up selecting VeriFone's bid had been riddled with "pervasive improprieties."
Some analysts were slightly more forgiving.
J.P. Morgan, while downgrading the stock to "neutral" from "overweight", said moving from selling equipment to more regular revenue from offering a service was difficult and it was optimistic the new CFO could clear the accounting doubts.
UBS Investment Research cut its price target to $26 from $39, saying risks had increased for the company in executing the change in approach, but it reiterated its "buy" on the stock.
"We think the problems are largely fixable over the next 6-12 months," UBS said.
But an analysis of the quality of VeriFone's earnings shows their quality is well below that of peers.
VeriFone's earnings quality score was 10 out of 100 as of the quarter ended October 2012, compared with the industry's median score of 81, according to Thomson Reuters StarMine.
The model measures the sustainability of future earnings based on past results and focuses on financial components such as accruals, cash flow, operating efficiency and one-time exclusions.
One of the main reasons for the low score was the significant rise in goodwill, which StarMine said was possibly due to acquisitions. The company has made 15 acquisitions in the past three years, according to Thomson Reuters data.
VeriFone shares closed down 43 percent at $18.24 on the New York Stock Exchange on Thursday.
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