Micros (MCRS) recently lowered its full-year forecast and provided a fiscal 2014 outlook that underwhelmed the market. The overarching factor behind this change in sentiment lies with the macroeconomic climate and Micros' proportionately high exposure to the North American and European markets. However, macroeconomic issues aside, we also think the investment community is concerned with other disruptive forces. We've broken down Micros' key business segments and analyzed the disruptive forces, and we think the investment community is overly discounting this market-leading company.
Micros' narrow economic moat is derived from its entrenched position in the hospitality and retail segments. Although the company's shares have risen considerably in recent weeks, we believe there is still 9% upside to our current fair value estimate of $50 per share. Our favorable outlook is reinforced by high customer switching costs, scale-related cost advantages, and considerable free cash flow generation.