Stock Analysis & Ideas

Paysafe Stock: RBC Sees ‘Ample Growth Potential’ Ahead of Earnings

The second quarter was a busy period for online payments company Paysafe (PSFE). Over the course of the quarter, Paysafe made several new or expanded partnership announcements, including a unified payments partnership with Strive Gaming, a broadened partnership with the online gaming brand of Ontario Lottery and Gaming, a foray into the Arkansas iGaming market, and the start of a partnership with APEXX Global to provide processing services to APEXX’s base of global merchants.

Ahead of the company’s upcoming Q2 earnings (August 10), RBC’s Daniel Perlin expects the payments platform to report “generally in line” with his estimates. Perlin is calling for revenue, adj. EBITDA, and adj. EPS of $375 million, $106 million and $0.01, respectively, compared to the Street’s expectations of $376 million, $106 million and $0.03.

Perlin thinks investors will be focused on several key items. The growth and outlook for iGaming is one and while the analyst notes that it is not a major revenue generator at present, digital wallet Skrill’s “ability” to win tier 1 operators (like Barstool) shows it has “potential to scale.”

Take rates’ stability will also be under the microscope, given the business and vertical mix led to a ~200bps year-over-year drop in Q1/22.

Via important metrics such as deposits, conversion rates, and the “stabilization of one-month actives,” investors will also be looking for “proof-points” in the digital wallet turnaround.

Lastly, while Perlin notes that talks with management have indicated consumer spending is “holding up,” the analyst is keeping an eye out for any signs of cracks to appear.

Offering his current thoughts on the stock, Perlin summed up, “Though challenged by regulations in Europe and FX headwinds, we believe management is making proper adjustments with its digital wallet business and has potential to scale its currently immaterial iGaming business to grow with the emerging North American market through flagship customers, such as Barstool, and with a new CEO and M&A establishing a presence in LATAM, we see ample growth potential.”

Accordingly, Perlin rates PSFE stock an Outperform (i.e. Buy), while his $4 price target makes room for 12-month gains of a hefty 107%.

The Street’s average target is even more upbeat; the figure stands at $4.31, suggesting shares can climb 129% higher over the coming months. Overall, the stock boasts a Strong Buy consensus rating, based on 3 Buys vs. 1 Hold. (See Paysafe stock forecast on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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