March 02, 2015 - 11:13am EST by
2015 2016
Price: 25.50 EPS 0 0
Shares Out. (in M): 40 P/E 0 0
Market Cap (in $M): 1,009 P/FCF 0 0
Net Debt (in $M): 0 EBIT 0 0
TEV (in $M): 872 TEV/EBIT 18.5 0
Borrow Cost: Available 0-15% cost

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  • Technology
  • IT Security
  • Security Software
  • Competitive Industry


Recommendation: Initiate a short position in Vasco Data Security International, Inc. ("Vasco", "VDSI", or the "Company") at $27 or higher with a ~12 month price target of $18. When valuing the business on reasonable valuation assumptions, upside to the short thesis is a ~50% gain based on a $14 share value.
Vasco's common stock has been a top performer, appreciating bu 250% over the past year. After two years of consecutive guidance misses and tepid performance in FY12/13, Vasco has benefitted from a strong product order cycle mainly consisting of lower margin commodity card readers which started in 2014 and is expected to last until 2Q15. Vasco's trading price has addtionally benefitted from recent news headlines related to cyber-security breaches as well as a misunderstanding by the sell-side of the longevity and lack of visbility around future revenues.
Accordingly, the market is valuing Vasco as a high-growth security concept at over ~19x FY15E EBITDA, while in reality Vasco is a commoditized hardware provider with lumpy, unpredictable revenues competing against larger well-capitalized peers. At current prices VDSI offers a hihgly asymmetric return profile with $7 to $13 of profit potential for the short thesis compared with a potential loss of $3 to $4.


I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


  • Guide down & deterioration of future orders.
  • Competition and disruption by software +OTP players.
  • Continued slowdown in business momentum.
  • FX headwinds.
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