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Payment solutions provider VeriFone (NYSE:PAY) reported mixed third quarter results Wednesday morning, and its revenue outlook was slightly disappointing. Revenue grew 56% year-over-year to $493 million, a few million short of consensus estimates. Adjusted earnings surged 53% year-over-year to $0.75 per share, which was several cents higher than consensus estimates. The firm provided fourth quarter revenue guidance of $495-$500 million, which was considerably lower than the consensus estimate calling for $519 million. However, the annual adjusted earnings forecast calls for $0.75-$0.77 per share, compared to a consensus estimate of $0.74.

Though the firm benefited greatly from acquisitions, particularly abroad, organic revenue grew 8.9% in North America and 28.1% internationally on a currency-neutral basis. Non-GAAP gross margins fell 20 basis points sequentially to 39.5%, but we're struggling to justify the magnitude of the share price decline after the report. Guidance was weaker than expected but not a complete game changer, in our view. Latin American revenues will be weak as a result of a fire in Brazil that completely destroyed the firm's staging and repair center, which has damaged sales efforts in the region. But while most companies are struggling to prevent sales declines in Europe, VeriFone is actually growing its presence, signing up over 10,700 cabs in London to its point-of-sale system.

We suspect investors are worried about the impact of Square, PayPal (NASDAQ:EBAY) and the disruption in payments likely to be caused by mobile wallets and payment systems. However, PayPal purchased over 15,000 e-wallet licenses for VeriFone's deployment and expects that number to grow to over 50,000 by year-end. VeriFone also had key North American retail wins from Verizon (NYSE:VZ), North Face (NYSE:VFC) and GameStop (NYSE:GME) as it rolls out its MX900 series. CEO Douglas Bergeron noted that most retailers want full-service point-of-sale (POS) systems that can service every payment type, rather than having limited functionality. We think the firm is well positioned to sustain a shift to mobile payment solutions.

At current levels, VeriFone trades at a hefty discount to our fair value range, but shares remain technically weak, as they only score a 3 on the our stock-selection methodology. We think shares will offer an excellent risk/reward when technicals improve.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: EBAY is included in our Best Ideas portfolio.