They work in the background. Quietly checking on your credit authenticity each time you complete a transaction on the web. Buying a book? Checking out at your favorite online store? If so, the Authorize.net (ANET) probably has something to do with the process. They are in the business of helping merchants to accept credit cards and remain secure that the card is valid.As more and more people move towards purchasing products and services online. In a recent survey Harris Interactive, found that:
“people who said they had experienced troubles in digital transactions, 91% said they were worried about data security. To have a positive experience the respondents singled out two key elements; Web site security (26% of respondents) and ease of completing a transaction (22%).”
All indicators point to the continued adoption of online activity especially shopping. This in turn will create additional revenues for Authorize.net and other companies in the business of providing merchant accounts (such as Ebay‘s PayPal division and many commercial banks). But, if you are looking for a pure play in the area of security and transaction authorization, ANET, may continue to provide happy returns for investors.
Don‘t be put back by the sound of Internet transactions and the concern that this company may rely on a select group of consumers. Even though they make 100% of their money from web transactions, they have a large customer base.
Recently Bankrate.com released a great series on the good bad and the ugly of credit card usage. In one particular article, the commented:
Credit cards can be a good idea. Just because many Americans have overdosed on debt doesn’t mean using credit cards is a bad idea. In fact, there are times when a credit card is clearly the best choice. For starters, you usually get far more purchase protection with a credit card than you do with cash or check. That helps when you buy a $1,000 laptop that suddenly has a damaged screen a week after you walk out of the store, particularly if the store manager and the manufacturer insist it’s your fault.
Save-the-day features kick in when you travel. Credit cards often include free car-rental insurance and some travel insurance, though offers vary with each issuer.
And if a thief picks your pocket, your liability is much lower than with a wad of cash.
Add in airline miles, rewards points and cash back, along with the interest-free loan if you pay the balance every month, and you’ll find a lot of credit card experts using their cards to charge everything they can.
And if that is not enough, Cybersource (CYBS) is merging with Authorize.net. The offer is for ANET shareholders to receive 1.16 shares and approximately $4.50 cash for each ANET share. As of today, that amounts to $20.13 per share, a 4% increase over the July 18th trading value. The benefit is that this will provide for lower costs, as the merger will allow for cost cutting across both companies. Even though there is no big upshot on the buyout price, the net effect of the combination looks to be beneficial for investors.
So, in the end, ANET may be a good addition to portfolios looking to profit from a picks and shovels approach to the expansion of the Web and the continued adoption of buying online.
*Clients of Horowitz & Company do not hold a position in ANET as of this writting.