Paysafe is Truly Not a Safe Investment for Anyone
InvestorPlace - Stock Market News, Stock Advice & Trading Tips As the company lowers its revenue guidance and Wall Street analysts slash their price targets, investors should avoid PSFE stock....
Buying stocks on dips can sometimes be a profitable strategy. However, grabbing shares of Paysafe (NYSE:PSFE) could be harmful to your fiscal health, as PSFE stock has entered into a harsh and persistent bear market.
If you abide by the principle of “the trend is your friend,” then there’s nothing friendly about Paysafe in 2021.
Don’t assume that the price action of the stock will turn around in 2022, either. It’s bad enough that Wall Street analysts are slashing their outlook on PSFE stock. On top of that, even the company itself is lowering its expectations.
As the old saying goes, you’ve got to choose your battles carefully. Therefore, cautious investors need not battle the Paysafe bears, as they’re not likely to win.
PSFE Stock at a Glance
Just to recap, Paysafe debuted for public trading on March 31 after completing its special purpose acquisition company (SPAC) merger with Foley Trasimene Acquisition II. Prior to the SPAC merger announcement, the stock (which originally traded under the ticker symbol BFT) stayed close to $10. That’s not unusual for pre-deal-announcement SPAC stocks.
However, what happened to the stock in early 2021 was headline-grabbing.
Post-announcement, BFT/PSFE stock rallied to a 52-week high of $19.57 on Jan. 21. Folks who didn’t take profits at that point learned a harsh lesson. For the most part, buyers went into hibernation over the next 10 months and the price just fell and fell.
One of the worst moments was when PSFE stock fell below the $10 level in August. When SPAC stocks decline below $10, this could be a bad sign.
By mid-November, the share price was below $4.50 and there was no relief, it seemed, for the loyal shareholders.
So, does this represent a bargain, or just a toxic stock to avoid altogether?
No Sugar Coating
You know it’s been a rough quarter when a company’s top executives are compelled to acknowledge the subpar performance.
When it comes to Paysafe’s third quarter of 2021, CFO Izzy Dawood bleakly commented, “Overall, there is no sugar coating that our financial results are disappointing and not up to our expectations.” Meanwhile, CEO Philip McHugh admitted that Paysafe suffered “both market and performance challenges within the digital wallet business” during the quarter.
How bad was it?
Well, starting with the top-line result, Paysafe generated $353.6 million in revenues. That’s less than the $355.5 million from the prior year’s quarter, as well as the $370 million expected by analysts on Wall Street.
Now turning to the bottom line, Paysafe sustained an earnings loss of $147.2 million. That’s significantly worse than the year-earlier quarter’s loss of $38.1 million. Paysafe attributed the revenue weakness to an “exit of certain clients in the direct marketing vertical within the Integrated Processing segment.”
Another problem was the company’s poor performance within its digital wallet business. In that segment, Paysafe’s quarterly revenues declined by 15% year-over-year.
The Experts Are Disappointed
With all of the foregoing in mind, Paysafe reduced its full-year 2021 revenue guidance from a range of of $1.53 billion to $1.55 billion, to a range of $1.47 billion to $1.48 billion.
As you might expect, analysts on Wall Street also lowered their expectations.
For example, Cowen analyst George Mihalos downgraded Paysafe from “outperform” to “market perform.” He also cut his price target in half, from $14 to $7. If you think that a $7 price target is harsh, check this out. Evercore ISI analyst David Togut and Credit Suisse analyst Timothy Chiodo both issued a price target of $4 on PSFE stock. RBC Capital analyst Daniel Perlin was more generous, disclosing a price target of $9.
Still, Perlin’s previous target had been $15, and he justifiably called Paysafe’s quarterly performance and full-year guidance “disappointing.”
The Takeaway for PSFE Stock
At this point, it’s safe to conclude that PSFE stock is a falling rock, not a compelling bargain. I give it an “F” in my Portfolio Grader.
The analysts might seem harsh in their assessments of Paysafe. Yet, the quarterly data was undeniably a major letdown.
Hence, investors can resist the temptation to pick up shares of PSFE stock, as there are much better buys out there.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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