Positive Outlook Makes Foley Trasimene Acquisition II Shares a Buy

Payments processor Paysafe – which has agreed to merge with the SPAC Foley Trasimene Acquisition II (NYSE:BFT) stock – has many strong, positive catalysts. There’s a good chance that, after the merger is complete, Paysafe will become a takeover target.

Paysafe Card Iphone Display with Keyboard Mouse and Red Pen BFT stock
Source: Sulastri Sulastri / Shutterstock.com

Importantly, Paysafe offers both online and in-store payment processing, likely leaving it very well positioned to benefit from two important trends: the continuing surge of online transactions and the pent-up wave of in-store shopping that should emerge once the novel-coronavirus pandemic is over.

A Multi-Pronged Threat

Paysafe enables many types of payments. It allows businesses to enable their customers to pay online using cash, to pay online using digital wallets and to accept payments through their software. Paysafe facilitates standard online payments for e-commerce and standard brick-and-mortar point-of-sale (POS) transactions.

In fact, in the section of its website dedicated to its POS solutions, Paysafe reports that it has “20+ years experience servicing over 200,000 small and medium businesses.”

Paysafe Can Benefit From 2 Strong Catalysts

Given the company’s exposure to multiple types of online payments, it is very well positioned to benefit from the explosive growth of both e-commerce and online payments. As I’ve stated in past columns, although I expect the growth of those activities to drop meaningfully after the pandemic is over, I still anticipate that they will continue to expand fairly rapidly.

Many consumers will eagerly look to return to brick-and-mortar stores after the pandemic is over, But millions of individuals who became used to utilizing the internet for shopping and making payments for the first time during the pandemic will continue those habits when Covid-19 becomes a distant memory.

Further, as more young, technically adept consumers obtain high-paying jobs, the amount of money spent online will naturally surge.

Given Paysafe’s large exposure to brick-and-mortar stores, the company should get a boost from the return of millions of shoppers to such retail outlets.

Another Positive Catalyst for BFT Stock

In his Feb. 26 column on Foley Trasimene Acquisition II, InvestorPlace contributor Thomas Niel warned that the valuation multiples of names like Paysafe could decline “if future years bring lower-than-expected growth for online sports gambling companies and iGaming operators.”

In past columns, I’ve been bearish on Golden Nugget Online Gaming (NASDAQ:GNOG) stock largely because I think that the competition in the online gambling space will be intense, making it difficult for relatively small firms like Golden Nugget to succeed in the space.

I have little, if any, doubt, however, that the overall popularity of online gambling will surge tremendously over the months and years ahead as many more states legalize the activity. Further, the popularity of online gambling should also be meaningfully boosted as more Americans learn about the activity through advertising, word-of-mouth, media coverage, and social media posts. I believe that the growth of these activities will significantly surpass expectations.

And regardless of which casino operators win the battle for online gamblers, the financial results of Paysafe and other online payments processors should get a huge lift from the proliferation of online gambling.

Takeover Speculation

Billionaire investor Bill Foley is backing the Foley Trasimene Acquisition and is to become chairman of Paysafe in the wake of its merger with the SPAC. Foley was “involved in more than 100 acquisitions and many spin-offs,” OPTO Trading Intelligence quoted Real Money as reporting.

InvestorPlace contributor David Moadel recently noted that one of Foley’s previous SPACs merged with Fidelity & Guaranty Life. The latter company, in turn, was acquired by Fidelity National Financial (NYSE:FNF).

Given Foley’s history, I think it’s a good bet that Paysafe, whose long-term outlook is quite attractive, will become a takeover target and then eventually be acquired. As a result, those who buy BFT stock and hold onto it for a couple of years should realize an impressive return on their investments.

The Bottom Line on BFT Stock

According to Niel, Foley Trasimene Acquisition II was trading at an implied EV/EBITDA ratio of around 25x in late February. Meanwhile, as of March 2, the EV/EBITDA ratios of PayPal (NASDAQ:PYPL) and Square (NYSE:SQ) were 46x and 295x, respectively.

As a result of these metrics and the other points I discussed, I believe that Paysafe is meaningfully undervalued, making BFT stock worth buying for longer-term investors.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. 

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.


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