Paysafe (NYSE:PSFE) stock represents a few broad trends making it interesting, and ultimately worthy of speculation.
The payments solutions provider has several decades of business operations experience behind it. It recently became publicly traded after merging with a shell company led by Bill Foley.
Paysafe is interesting in that it is a fintech business funded by a SPAC. However, that alone doesn’t make it a must buy by any means. If anything, SPACs stir trepidation.
Yet, the company’s position and recent results indicate that now is a good time to buy into Paysafe.
Strong Recent Performance
Paysafe’s second-quarter earnings are a reasonable indicator that investors should consider purchasing soon.
As a payments processing business Paysafe depends upon transaction volume heavily to drive its business forward. The company’s volume in the second quarter was much higher than it was a year prior. Paysafe recorded $32.3 billion in transaction volume, up 41% from the $22.7 billion in volume transacted through its system a year earlier.
That increase in volume led to Paysafe’s revenues increasing 13%, to $384.3 million in the quarter. Perhaps most importantly, Paysafe’s net income, hit $6.6 million, after recording a loss of $15.9 million in the same quarter a year ago.
This momentum has many on Wall Street believing in the prospects of the company. And like it or not, Wall Street has a lot of sway over what happens on Main Street.
Fortunately, all nine of the analysts with coverage of PSFE stock have it rated a buy. That is quite reassuring given the equity’s downward trajectory since earlier this year.
In any case, those analysts give PSFE stock an average target price of $14.11. For an optimist looking to buy the dip, that’s very encouraging: It indicates roughly a 70% upside from its current price.
A good portion of that optimism stems from Paysafe’s continuing expansion plans.
In the month of August alone, Paysafe has announced three acquisitions. On Aug. 2, Paysafe announced that it would acquire Peruvian alternative payments platform PagoEfectivo.
The broader Latin American market is among the world’s fastest growing online markets and also requires alternative payment methods. In fact, Latin America is noted for is home to a larger underbanked population relative to other regions of the world, giving Paysafe a strong entry point in PagoEfectivo.
Then, on Aug. 16 and Aug. 22, Paysafe announced two further acquisitions in SafetyPay and viafintech, respectively.
SafetyPay, another Latin American alternative payments platform, was purchased for $411 million in an all-cash deal. SafetyPay operates in 11 Latin American nations as well as Europe. It boasts the largest network of banks and cash collection points in those Latin American nations. The acquisition furthers Paysafe’s growing presence in the region as a clear growth priority.
Paysafe acquired viafintech of Germany in an all cash deal. The SafetyPay acquisition included 20,000 collection points across seven European nations with the viafintech deal adding 20,000 centered in Europe and worldwide.
A few things are clear about Paysafe’s business. First of all, Paysafe operates in a low-margin, high-volume sector. Despite the fact that it processed in excess of $30 billion of transactions last quarter, it managed to squeeze a much smaller $6.6 million in net income from that.
However, that volume should rise as Paysafe’s acquisitions place it squarely in high-growth regions hungry for alternative payment options. That will mean that Paysafe will see a rising quantity of transaction fees moving forward. The company’s aggressive string of recent acquisitions will be central to that growth narrative.
And as those acquisitions are integrated into the company, expect improvement in the company’s metrics. PSFE stock is clearly a risky proposition in fintech as evidenced by its price, but the upside and strategic execution make it worthwhile.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.