VeriFone High-Jumps Over Low Bar

NEW YORK ( TheStreet) -- Having once called the company a disaster in the making, I've pulled no punches when it comes to discussing the state of payment processing giant VeriFone ( PAY).

Not only has the company been burdened with chronic struggles in execution, but VeriFone -- which recently ousted CEO Doug Bergeron -- has seen its market share erode amid threats from privately held Square and Intuit ( INTU), among others.

It goes without saying that all of these concerns have been reflected in the stock price, which at one point was down close to 50% on the year, effectively ending Bergeron's tenure as CEO. Believing the company had finally "paid its dues," retail investors are ready to believe in this story again, citing (among other things) VeriFone's strong third-quarter results. But is it worth the reward of the 47% jump in the stock price since the middle of June?

Despite the third-quarter performance, which included a revenue beat of at least 5% (according to some estimates), I don't think retail investors should get carried away here. I'm not suggesting the sequential improvement was not meaningful. I just don't believe this company, which is still without a permanent CEO, has sufficiently addressed its lack of competitive leverage.

I suspect VeriFone bulls will disagree. But let's not pretend that in the June quarter management didn't "throw everything out, including the kitchen sink." What I mean by this is, given the dire state of the company, along with a CEO search, management had essentially thrown its hands up with respect to guidance -- lowering the bar so low that research firm Zack's immediately downgraded the stock to "strong sell."

So, yes, the results came in much better than expected. But to be perfectly honest, I don't think anyone that has a finger on the pulse of this company really expected much.

Another thing that's being ignored here is that, accompanied by this "outstanding quarter" is a 16% decline in revenue. Not to mention, this quarter revealed more margin erosion, which led to a miss.

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