Paysafe (NYSE:PSFE) stock has witnessed immense selling over the past six months. As investors dumped its stock, Paysafe lost over 65% in value and hit a new 52-week low of $3.18.
The massive drop in the shares of this payments platform provider reflects the weakness in its digital wallet segment that accounted for about 24% of its total revenues in Q3.
Paysafe’s digital wallet segment is taking a hit from new regulations and customer pricing that proved counterproductive.
During the Q3 conference call, management stated that Germany (one of its key markets) imposed a cap on single-person betting amounts. Meanwhile, taxes on casino and poker games have made the games unprofitable for the operators. Further, the local licensing requirement in the Netherlands took a toll on its digital wallet segment.
What’s Next?
Expecting the challenges in the digital wallet segment to continue to hurt its financials, Paysafe lowered its full-year revenue, gross profit, and adjusted EBITDA guidance.
While management stated that it is taking steps to bring growth back to its digital wallet segment, investors continue to sell the stock.
TipRanks’ Stock Investors tool shows that about 3.2% of the investors who hold portfolios on TipRanks have lowered their exposure to Paysafe stock over the past month.
Taking note of the weakness in its digital wallet business, Cowen & Co. analyst Georgios Mihalos downgraded Paysafe stock to a Hold from a Buy. Mihalos expects a turnaround in Paysafe’s digital wallet to take time, which will limit the “upside to PSFE’s current below-consensus 22E.”
Mihalos lowered his adjusted EBITDA estimates for FY21/22/23 and cut the price target to $7 from $14.
Stock Rating
Alongside Mihalos, most Wall Street analysts remain on the sidelines due to the softness in the digital wallet business. On TipRanks, Paysafe sports a Hold consensus rating based on 1 Buy and 4 Holds.
Meanwhile, Paysafe scores a 1 out of 10 from TipRanks’ Smart Score rating system, indicating it could underperform the market averages.
The average Paysafe price target of $5.38 implies 25.7% upside potential to current levels.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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