The recent performance of Paysafe (NYSE:PSFE) stock has certainly left a lot to be desired for growth investors. Indeed, investors in Paysafe have been rather underwhelmed with this stock’s performance since it went public at the end of March.
Shares have basically traded flat and remain approximately 30% below their January highs.
Paysafe came public via a special purpose acquisition company (SPAC) reverse merger with Foley Trasimene Acquisition II. Since this merger was announced, a number of eager investors piled in.
However, concerns about the ultimate valuation of Paysafe coming out of the SPAC, and a sector-wide decline in SPAC-related companies, has driven overly bearish sentiment.
That said, I do think Paysafe is one of the few SPACs with the kind of growth potential that could justify its existing valuation. Additionally, I think the $1.3 billion raised via the IPO and the $2 billion PIPE provide the company with the growth capital investors have been looking for.
Given the impressive growth Paysafe has seen in the past, I think this is a stock worth considering as it continues toward its IPO level.
Right now, investors are still paying a 35% premium to the IPO price. That’s a significant premium for any company. However, I think there are two key reasons why this premium could be justified today.
So, let’s dive into it.
Cathie Woods Is Bullish on Digital Wallet Stocks
Paysafe is a global payments company, with a focus on digital wallet, eCash and integrated processing solutions.
This sector is one that has become much more high-profile of late. In particular, Cathie Woods has raised the profile of digital payments stocks in a recent interview with CNBC.
In this interview, Woods suggested now is the time to get “very excited” about digital wallet stocks. Her top choice in this space appears to be Square (NYSE:SQ). However, it’s not far-fetched to consider PSFE stock in the group of companies she’s considering right now for her innovation fund.
Currently, the company’s platform plays a role in processing nearly $100 billion of payment volume. Of this volume, approximately 75% is derived form online and integrated services.
Indeed, Paysafe’s projected CAGR of 11% suggests Woods may be right on the money with this stock. It remains to be seen whether she will ultimately jump into PSFE because Paysafe’s double-digit growth rate is below her investment hurdle rate of 15% CAGR.
However, PSFE stock is still intriguing for long-term growth investors bullish on this space.
Right now, Woods has managed to build a nice brand for herself. Her funds continue to see massive capital inflows as investors search for growth today. Accordingly, it’s important to pay attention to where the thought leaders are focused. This goes double for those seeking to get ahead of the growth curve.
PSFE Stock a Growth Investor’s Dream Investment
Of course, the company’s digital wallet platform is great on its own. An aggregate CAGR of 11% is nothing to sneeze at and should provide a tremendous amount of long-term growth over time.
However, the company’s iGaming segment is something that has growth investors salivating right now. Paysafe has estimated it will grow its iGaming business at a CAGR of 50% for the next four years.
Indeed, if PSFE can grow its market share in the iGaming market, there’s the potential this company could accelerate its growth rate over time. I think Paysafe’s exposure to this growth segment is very bullish for long-term investors right now, and remain cautiously optimistic with respect to this stock’s growth potential.
Furthermore, Paysafe has shown some intriguing projections in terms of its profitability. The company’s projected gross margin is 63%, an impressive number compared to competitors like Square with a gross margin under 30%.
Conclusion
Paysafe operates in a high-growth area of the digital banking sector. Indeed, investors bullish on the ongoing transformation away from traditional banking toward digital wallets, Paysafe is an option to consider today.
I think the company’s global reach is impressive. Paysafe currently operates in more than 120 countries and in 40 currencies. It’s a growth gem in key addressable markets that continue to expand.
If other investors like Cathie Woods are right, Paysafe is in the right place at the right time. This is a company well-positioned to capture market share for early investors. Accordingly, at this level, I think PSFE stock is an intriguing speculative buy.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
