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Sport News | PSFE stock is a steal under $4 per share, buy while it’s low

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PSFE stock is a steal under $4 per share, buy while it’s low

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paysafe (NYSE:PSFE) is a payment company specializing in electronic applications such as digital wallets, electronic money and online betting. The company had the misfortune to go public through a special purpose acquisition company (SPAC). While SPACs and payment stocks have fallen out of favor over the past six months, PSFE stock has slumped.

Source: Devina Saputri / Shutterstock.com

Shares had initially traded as high as nearly $20 following excitement over the deal. Now, however, the stock has fallen below the $4 mark. With Paysafe down 75% from levels seen at the start of last year, is it time to buy the Fallen Star?

Yes yes it is. Here’s why.

Payments stocks were destroyed in 2021

PSFE stock had a terrible performance last year, there is no argument in that.

However, it wasn’t the only online payment company to struggle. biggest rival Global Payments (NYSE:GPN) was the worst performing tech stock in the S&P500 index for much of 2021; shares ended down about 40%.

Even credit card companies such as Visa (NYSE:V) suffered big sales. A confluence of factors is the cause. International travel – which is a major driver of payments earnings – remained depressed due to new variants of Covid-19. When people travel to foreign countries, they need to exchange currencies, which gives payment processors the opportunity to earn higher margins on transactions involving multiple currencies.

In addition, investors feared disruption. Cryptocurrencies were seen as a threat to traditional payment mechanisms. This concern has faded as the crypto market has corrected sharply in recent months. Additionally, e-commerce sites such as Amazon (NASDAQ:AMZN) has started battles with credit card companies such as Visa, although it looks like credit cards have won this skirmish for now.

There were never many indications that these dreaded disruptions were actually happening. Companies like Global Payments and Visa still show growing profits, but during panics, fear feeds on itself.

Over the past month, however, payment stocks have firmed up. This creates an opportunity to buy laggards such as Paysafe.

Insiders are certainly seizing the moment.

Insiders Agree, PSFE Stocks Are Attractive

If a stock is so cheap, why aren’t company insiders buying it? This is often a question you hear for a stock that has fallen sharply, like Paysafe.

In this case, this question no longer applies. Because in December, Paysafe insiders stepped up their stock buying. Company CEO Philip McHugh purchased 290,000 PSFE shares for a total outlay of approximately $1 million. He was also joined by other Paysafe executives with smaller purchases.

Buying the CEO was not the end. Cannes Holdings (NYSE:CNNE) recently purchased over $22 million worth of PSFE stock.

Cannae, if you’re not familiar, is the holding company controlled by financial services legend William Foley. Foley has a long and storied track record in the real estate and financial industry. Foley led the Paysafe SPAC and is stepping in to buy more shares when they are exceptionally cheap.

Why it’s an attractive price

Paysafe was a listed company on the London Stock Exchange. Then, in 2017, private equity firms black stone (NYSE:Bx) and HVAC privatized Paysafe for approximately $3.9 billion. Including debt, the total consideration reached nearly $5 billion for the company.

With PSFE’s stock at around $3.75 today, its current enterprise value is around $4.7 billion. So, according to the current market estimate, Paysafe is worth around $300 million less now than private equity was willing to pay for the company in 2017.

It is completely irrational.

After all, Paysafe was only generating $1 billion in annual revenue at the time. Today, annual revenues are around $1.4 billion. Given that highly respected buyers estimated the company to be worth $5 billion years ago and the company is 40% larger today, the valuation should be significantly above the $5 billion threshold.

An enterprise value of $7 billion, which would match the company’s 40% growth since 2017, would put the stock price in the $7 range today. In retrospect, the opening price of the $10 SPAC deal for Paysafe appears to have been a bit too aggressive. However, it is not too difficult to argue that a fair price for PSFE stock today is closer to $7 or $8 instead of $4.

Verdict of PSFE actions

Paysafe has had a truly awful 2021. There are no two ways around this. However, much of the stock’s decline was due to outside factors rather than a problem with the company itself. When industry leaders like Visa are under pressure, it’s hard for a new SPAC like Paysafe to stay afloat.

That said, 2022 is shaping up to be a much better year. Paysafe shares stabilized despite a continued rout in growth and stock market speculation. With insiders and sponsors of the SPAC deal mobilizing to buy more of the company, it seems like an attractive entry point here.

As of press date, Ian Bezek held a long position in GPN and V shares. He also took a long position in Paysafe via selling naked puts at $3 in January 2023. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Ian Bezek has written over 1,000 articles for InvestorPlace.com and In Search of Alpha. He also worked as a junior analyst for Kerrisdale Capital, a $300 million New York-based hedge fund. You can reach him on Twitter at @irbezek.

PSFE stock is a steal under $4 per share, buy while it’s low

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