Shares of digital payment company Paysafe (PSFE) collapsed 15% in one day after losing revenue earlier this month, and hasn’t really recovered since. While the company reported a 41% increase in “total payment volume” and a 13% increase in revenue, it exceeded revenue expectations, turning a $15.9 million loss a year ago into a $6 profit. 6 million in Q2 2, but investors penalized the stock nonetheless. — presumably because the third quarter forecast, and to a lesser extent the full year forecast, didn’t quite live up to Wall Street’s expectations.
But according to one analyst, investors who have sold Paysafe stock have “undervalued” the stock’s “growth potential”.
MET analyst James Fotheringham had the opportunity to sit down with Paysafe’s CEO Philip McHugh and CFO Izzy Dawood to discuss where the company will be heading in Q3, Q4 and beyond — and to clear up investor misconceptions that could be causing the stock’s sell-off. have caused.
As Fotheringham explains, Paysafe is targeting long-term organic revenue growth of 11% to 14% per year. (To be clear, “organic” growth is growth in the core business, excluding any additional growth from acquisitions. But Paysafe has in fact made at least three “bank-related” acquisitions recently — SafetyPay and PagoEfectivo in Latin America, and Viafintech in Latin America. Germany — and further acquisitions are expected). The company’s biggest growth is expected to come from its iGaming business – a growth rate of 50% per year.
Globally, Paysafe says iGaming (online gaming, and in particular online gambling) accounts for a third of the company’s revenue, meaning iGaming only makes up 2% of the company. U.S business, there is a lot of room to grow this division here. In that regard, Paysafe notes that “legalized iGaming” should be allowed in half of the United States by the end of this year, growing to 30 to 35 states “in the coming years.”
But if growth is going to be this strong, you may be wondering: Why is Paysafe’s outlook for this year so much weaker than Wall Street’s expectations? To put it bluntly, why does Paysafe expect to “miss profits” this year?
Sadly, Paysafe didn’t quite answer that question, but reassured Fotheringham that while third quarter earnings will be “weaker” than the company had hoped, fourth quarter will be stronger. The problem is, this still leads to smaller annual revenues than Paysafe or Wall Street expected.
Overall, Fotheringham is sticking with the bulls and repeating an Outperform (ie buy) rating on PSFE stock. Investors could see a gain of ~12% if Pachter’s price target of $40 is met. (To view Fotheringham’s track record, click here)
This stock has one asset that investors should always keep in mind: a unanimous assessment of the Wall Street consensus. All eight recent reviews have been positive, giving the stock a Strong Buy rating. PSFE has an average price target of $14.75, up ~78% from its current share price of $8.26. (See PSFE stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are those of the featured analyst only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.