Blackhawk Network Holdings Inc (HAWK): Should You Watch This Stock Like a Hawk?

Euronet Worldwide, Inc. (NASDAQ:EEFT) participates in many of Blackhawk Network’s product segments, excluding prepaid digital wallet services and electronic gift cards. In its prepaid services segment, it witnessed some Australian retailers cutting Euronet Worldwide as the middleman and going straight to mobile operators last year. In response to this new competitive landscape, it acquired ezi-pay, New Zealand’s largest provider of gift card services in November 2012, as part of its efforts to diversify and expand its non-mobile content business.

Green Dot Corporation (NYSE:GDOT) is the largest domestic provider of general purpose reloadable (GPR) prepaid cards. It competes with Blackhawk Network’s PayPower GPR card, but also has its cards distributed by Blackhawk Network Holdings Inc (NASDAQ:HAWK). Green Dot also shares some investor concerns similar to those surrounding Blackhawk Network, and it faces significant concentration risk, with products sold at its top distributor Wal-Mart Stores, Inc. (NYSE:WMT) representing 64% of its fiscal 2012 revenues. In addition, it has a dual-class ownership structure favoring legacy investors.

Conclusion

The typical concerns over buying into newly listed stocks include the lack of a publicly traded financial track record and the share price drop following the expiry of the lock-up period for controlling shareholder sales. On top of that, Blackhawk Network has less bargaining power with distributors and has its revenue concentrated in the final quarter of the year. Current valuations for Blackhawk Network are reasonable but unattractive, representing a slight premium over peers.

The article Should You Watch This Stock Like a Hawk? originally appeared on Fool.com and is written by Mark Lin.

Mark Lin has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Mark is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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