Can VeriFone Continue to PAY in 2014?

NEW YORK (TheStreet) -- Any diehard sports fan will remind you that a game is never over until it's over. I don't believe anyone could have predicted the sort of comeback that VeriFone's (PAY) management team was able to manufacture.

After being left for dead due to chronic self-inflicted wounds, VeriFone stock, which reached a 52-week low of $15.34 on June 14, closed out the year with authority - soaring 75% in the last six months of the year. To put into context the deficit with which this company was working, even with that strong second half performance, the stock still closed the year down more than 8%. The question, though, is how much faith does management still deserve?

Having once called the company a disaster in the making, I'm not going to pretend that I'm suddenly the company's biggest fan. It's true that this recent turnaround has been nothing short of impressive. But I'm not ready to say that all of VeriFone's problems are now in the rearview mirror.

So far, Paul Galant, whom the company installed as CEO in September, has been saying all of the right things. Not to mention, he's brought with him considerable amounts of industry experience after having served as head of the Enterprise Payments and Cards units at Citigroup (C).

Unlike ousted CEO Doug Bergeron, Galant seems eager to transform VeriFone's hardware-centric business to more of a software/services oriented model. This is the same sort of market transition that rivals like NCR (NCR) had already adopted, which left VeriFone scrambling to preserve its market share. And to say nothing about the new threats brought upon by likes of Square and the popular GoPayment system from Intuit (INTU).

Given the promises and optimism brought by the new CEO, I do believe there is some degree of "things can't get any worse" buying with VeriFone. l would caution about setting expectations too high.

In the recent quarter, management talked impressively about the company's new direction, including that VeriFone beat estimates. But revenue was still down 12% year over year. And disappointingly, every geographic region, including North America (down 14%) and Europe (down 11%), reported revenue declines.

Not to take anything away from the new CEO or what VeriFone believes it can accomplish in 2014. But I don't think retail investors should get carried away here into thinking that this company is suddenly out of the woods.

Investors can look to rival Ingenico (INGIY) (which continues to grow revenue year over year) for confirmation, including having posted 40% growth in North America. Both companies compete for the same market. So the standards are in place. I haven't even mentioned eBay (EBAY) and the success it continues to enjoy on the strength of PayPal, its person-to-person payment service.

[Read: 5 Hiring Trends for 2014: What to Know Before You Send Out Your Resume]

Last September, eBay decided it needed to protect that golden goose and picked off payment services system Braintree for $800 million, a company that processed well over $12 billion in transactions per year, exceeding Square's output by a significant margin. eBay inked this deal shortly after it forged an agreement that allows for NCR's POS (point of sale) systems to integrate with PayPal's mobile services - a move that will enable customers to pay for goods and services using their smartphones.

It's these sort of deals that forces me to question VeriFone's future. Like, say, BlackBerry (BBRY) against Apple (AAPL), VeriFone always seems to be playing catch-up. Any progress will be stunted by a more capable foe. And I don't believe VeriFone investors should rest easy knowing that Apple's iPhone, which is armed with fingerprint technology, is always one app away from disrupting the industry.

This game is far from over. While announcing its with American Express (AXP), VeriFone's new management reminded investors that the company still has opportunities to grow. But with so many unknowns regarding the company's execution and competitive deficits, money has to be taken off the table here.

At the time of publication, the author was long AAPL.

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

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