Languishing Near $10 Price Levels, PSFE Stock Could See Better Days

Paysafe (PSFE) went public through a merger with Bill Foley’s Foley Trasimene Acquisition Corp II in March 2021. The stock hasn’t had a nice run since listing and continues to languish near the IPO price of $10. However, the stock was trading sharply higher in premarket on Aug. 6. Why is PSFE stock going up and is it a good stock to buy?

PSFE stock was also targeted by the Reddit group WallStreetBets. However, Reddit traders couldn’t trigger similar “magic” in the stock as they did with meme stocks like AMC Entertainment and GameStop. PSFE stock still trades way below the all-time highs of $19.57 that the SPAC hit before the merger.

PSFE stock was trading higher in premarket on Aug. 6. Value investors seem to be doing bottom-fishing in the stock near the $10 price level. The stock fell victim to the sell-off in SPACs and fintech companies. However, there has been a renewed interest in fintech names after Square announced the acquisition of Afterpay.

PSFE has a median target price of $16, which is a premium of over 55 percent over the current prices. The street high target price of $19 implies an 85 percent upside over the next 12 months. Even the street low target price of $15 is a premium of 46 percent. Wall Street analysts are bullish on the payments company and all seven analysts polled by CNN Business rate it as a buy or some equivalent.

PSFE stock looks undervalued near the $10 price level. The analysts polled by TIKR expect the company to post revenues of $1.54 billion in 2021 and $1.7 billion in 2022. The company has an EV (enterprise value) of just about $9.5 billion, which gives us a 2022 EV-to-sales multiple of 5.6x.

PSFE has a sound business model that's asset-light and generates a high EBITDA margin. The company is growing organically and through acquisitions. In August, the company announced the acquisition of PagoEfectiv, which is a Peru-based alternate payments platform.

Paysafe is a play on several industries. Apart from the core payments business, it also has a significant presence in the iGaming market. The growing penetration of online gaming and the favorable stance adopted by many U.S. states on allowing online gambling bodes well for Paysafe.

Also, Paysafe is a play on cryptocurrencies and its Skrill has partnered with Coinbase to allow the wallet users to buy cryptocurrencies. While the cryptocurrency market has looked weak over the last few months, it could rebound in the medium term.

PSFE isn't the typical high-growth fintech name. The company’s revenues are expected to grow 8.6 percent in 2021 and 10.1 percent in 2022. This is unlike some of the other fintech companies that are growing in high double digits and at times even in triple digits.

That said, if you're looking at an attractively priced fintech company that will offer stable growth, both organic as well as inorganic, PSFE would fit the bill. The stock has been languishing near the $10 price level for a long time and should see better days ahead.