Paysafe Ltd: Beaten-Down Payment Stock Could Rally by 400%

Bargain Hunters: Take Note of PSFE Stock

I continue to shop for battered technology stocks that are growing and display compelling valuations. An area that has seen stocks correct by more than 50% from their highs is the electronic payment space.

Some investors believe that the reopening of the economy could reduce the demand for online and contactless payments. But in reality, the electronic payment market is massive and rapidly growing.

While the electronic payment sector is dominated by major technology stocks, there are many smaller players with potential. Consider Paysafe Ltd (NYSE:PSFE), which has plummeted by 82% from its 52-week high of $17.96 (set in February 2021) and which established a low of $3.03 on January 24, 2022.

The selling of Paysafe stock has been excessive, especially since the company has been improving its fundamentals.

Paysafe develops integrated online electronic payment solutions that connect businesses with consumers. The company has transacted more than $100.0 billion on its payment platform. Its services include payment processing, digital wallets, and online cash solutions. (Source: “Company Overview,” Paysafe Ltd, last accessed February 22, 2022.)

In my view, Paysafe is well positioned to take advantage of the growth in the global e-commerce space.

From 2018 to 2020, Paysafe Ltd achieved annual revenues well above $1.0 billion. The company is expected to report revenue of $1.47 billion for 2021 and $1.54 billion for 2022. (Source: “Paysafe Limited (PSFE),” Yahoo! Finance, last accessed February 22, 2022.)

Given its market cap of $2.3 billion, Paysafe trades at a compelling 1.5 times its consensus 2022 revenue estimate.

(Source: “Paysafe Ltd.” MarketWatch, last accessed February 22, 2022.)

Paysafe Ltd has been generating earnings before interest, taxes, depreciation, and amortization (EBITDA) income and positive free cash flow. Moreover, it has a pathway to adjusted profitability in 2022.

Ugly Chart but Beautiful Risk/Reward Opportunity

Paysafe Ltd’s stock chart looks like those of other players in the electronic payment space. Many payment stocks have been trading down from their highs by more than 50%.

PSFE stock was subject to bearish sentiment for all of 2021, declining in a steady downward channel on weak relative strength and a moving average convergence/divergence (MACD) sell.

Paysafe stock also saw a major decline in its money flow index, an indication of declining buying.

Chart courtesy of StockCharts.com 

Paysafe Ltd continued to trend lower following the bearish gap down in November 2021.

It’s currently stuck in a death cross, a bearish technical crossover pattern that appears when the 50-day moving average breaks below the 200-day moving average.

Chart courtesy of StockCharts.com 

While it’s difficult for investors to be positive about PSFE stock, Paysafe Ltd’s improving fundamentals and solid revenue base offer some optimism. The immediate target is the 50-day moving average at $3.70 and the 200-day moving average at $7.68.

The Fibonacci retracement lines on the above chart show upper targets of $8.74, $10.49, $12.24, and the 52-week high of $17.96.

Analyst Take

Based on its valuation and improving fundamentals, Paysafe Ltd is bullish.

Paysafe stock being down by 82% from its 52-week high is excessive, given the bullish tailwinds for the global electronic payment space. For investors who are willing to ride out the bumps, PSFE stock could return significant price appreciation.