It’s easy to forget that Paysafe (PSFE) has been around since 1996. It has come into focus only recently, after going public in 2021. PSFE stock has had quite a brutal 2021, losing close to 79% of its value in the past year and about 25% year-to-date. However, the market, and we, feel that the company is primed to make a comeback as its fundamentals continue to improve. We are bullish on the stock.
Paysafe is an American company that provides digital commerce solutions to a multitude of businesses, including online businesses, small and medium-sized businesses, and consumers, through its Paysafe network around the world.
The company has two operating segments: US Acquiring and Digital Commerce. Its payment acceptance and transaction processing solutions are PCI-compliant, and it also has a facility for digital wallet solutions under brands like Skrill and NETELLER.
The news about the company’s new partnership with giants like betPARX to provide payments for its betPARX mobile applications across the states of Pennsylvania and New Jersey was well received by the market. Also, the news of a new CEO, who is expected to join in May, provided the market with much-needed excitement regarding Paysafe stock.
Paysafe might be a very small company when compared to other big payment solution providers like MasterCard (MA) and PayPal (PYPL), but its small size should not fool investors. The company is already a large diversified player in the industry and has made a name for itself as a specialized payments solution provider.
This can be noted from the fact that back in 2020, it helped process over $92 billion worth of transactions, and these payments included online and in-store purchases. In 2021, that payment volume was worth $122 billion.
However, being a relatively small company, it is susceptible to the inherent risks associated with small stocks, though the worst may be over for Paysafe. Also, the company’s attractive stock price right now, coupled with the latest bullish developments, has led us to have an optimistic approach regarding Paysafe stock.
Attractive Guidance for 2022
Paysafe had decent financials last year, though the market expected better. For the fourth quarter of 2021, Total Payment Volume came in at $31.5 billion, 20% higher year-over-year. However, its revenue of $371.7 million was about flat. Also, it generated a net income of $90.3 million compared to the net loss of $3.4 million it generated a year ago. Its adjusted EBITDA of $105.5 million was 11% higher compared to last year.
For Fiscal 2021, Total Payment Volume increased 22% to $122.4 billion, as stated earlier, and revenue grew a meager 4% to ~$1.49 billion. The net loss for the entire year, however, reduced to $111 million from the net loss of $126.7 million generated a year ago. Adjusted EBITDA also grew only 4%.
Paysafe was unable to deliver a positive EPS figure in 2021. However, the costs associated with going public drove up the company’s overall costs, and the volatility in the market because of COVID-19 also played its part. Therefore, it would not be wise to judge the profitability of the investment based on that parameter.
Further, for 2022, the company expects to generate revenues between $1.53 billion to $1.58 billion, and its adjusted EBITDA could be within the range of $440 million to $460 million. For the first quarter, revenue between $355 million to $365 million is expected as well as EBITDA within the range of $95 million to $100 million.
Several Developments
Online gambling is spreading like wildfire in America, as most states have legalized it, and Paysafe is also adding a significant amount of fuel to that fire through its global payments platform. The company’s brands like Neteller and Skrill are popular among online bookmakers and casinos.
In 2021, the company added more big names to its customer portfolio like DraftKings (DKNG), Caesars Entertainment (CZR), and Wynn Resorts’ (WYNN) WynnBET. Additionally, earlier this month, it announced its expansion into Ontario’s iGaming market, supporting iGaming operators.
Another remarkable event was when cryptocurrency exchange Binance allowed Paysafe’s platform to facilitate customer transactions. This could be immensely beneficial for the company as the number of cryptocurrency transactions is currently huge, and this number should continue to increase.
Presently, the company’s Skrill & Neteller digital wallet apps help customers safely do business with over 25,000 retailers, and the company has been continuously working towards increasing that number further. Moreover, it has also partnered with JPMorgan (JPM) as its core banking partner to give more options to its potential customers.
Wall Street’s Take
Turning to Wall Street, Paysafe sports a Moderate Buy consensus rating based on four Buys, two Holds, and one Sell rating assigned in the past three months. At $5.42, the average Paysafe price forecast implies 85.6% upside potential.
Conclusion
Paysafe is a growing company that has been trying hard to make a comeback. However, the thing is, it lacks the needed market support. One of the primary reasons can be its lack of proper dividend history. Secondly, there is the sharp volatility in its share price, which is driving away all the investors with a low-to-medium risk appetite.
However, any investor with good risk tolerance that is looking for a relatively small company with improving fundamentals should consider Paysafe stock.
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