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VeriFone Can't Pay Forever

New threats are emerging every day. We know about the popularity of eBay's (EBAY) PayPal, the dominant person-to-person payment service. Last year, eBay decided it needed to protect that golden goose and picked off payment services system Braintree for $800 million. Braintree processes well over $12 billion in transactions per year

Not to be outdone, there is also Square, which is growing in popularity. Square is reported to have processed more than $6 billion worth of transaction last year. Last but not least, Intuit (INTU) has a system called GoPayment, which is a relatively unknown service, but it is gaining traction.

And let's assume these threats weren't immediate. Even if they posed no real danger, VeriFone still needs rivals like NCR (NCR) and Ingenico (INGIY) to falter, other companies that spent the past year eating up market share. They've proven more stable and have not shot themselves in the foot.

Although VeriFone's recent partnership with American Express (AXP) may yield incremental benefits and growth opportunities, l wouldn't get carried away and set expectations too high. Verifone has done better in the past couple of quarters, yes. But the bar was set very low.

On Tuesday, when VeriFone reports fiscal first-quarter earnings, management will have an opportunity to prove its critics wrong. The Street will be looking for earnings of 27 cents per share on revenue of $429 million, which would represent flat revenue. (This is while earnings-per-share is expected to decline 47%.)

Let's not get too down. The stock is up so strongly over the past quarter, making profits off the depths from which this company comes. The good news is that CEO Paul Galant has been saying all of the right things. And after having served as head of the Enterprise Payments and Cards units at Citigroup (C), he knows his way around a register. Investors can only hope that this experience pays off.

At the time of publication, the author was long AAPL but held none of the other stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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