Paysafe (NYSE:PSFE) is a United Kingdom-based company that makes a specialty of handling gambling payments. Now having gone public through a special purpose acquisition company (SPAC), PSFE stock is being touted as the best way for you to get into iGaming.
Of course, the gambling payments game is not new. Established processors have had machines in casinos for decades. But what’s different about Paysafe is that the casino comes to you.
Paysafe’s first-quarter report indicates that it handled $27.7 billion in gambling payments during the March quarter. Additionally, it drew revenue of $337.4 million and had a net loss of $49.1 million. But there’s more you should know about PSFE before moving forward.
PSFE Stock: Want to Play?
While Paysafe’s revenue was up just 5% year-over year (YOY) and its net loss down just 4%, analysts like InvestorPlace contributor Chris Markoch like it a lot as iGaming and sports gambling come to the United States. This company’s quarterly report indicates that revenues from North American iGaming rose 66% YOY. That includes a cryptocurrency launch with Coinbase (NASDAQ:COIN).
However, it’s also important to note that Paysafe’s SPAC transaction was completed at the end of the quarter. This brought quite a bit of money to the balance sheet. It also triggered appointment of a new board — mostly outsiders and experts on either payments or the casino business. This means Paysafe has been trading under its current ticker symbol only since Apr. 1. During that period, the shares have come down about 17%.
That said, InvestorPlace contributor Thomas Niel chalks this up to the general fall of SPACs. Last month, Niel surmised that the stock had reached an appealing entry point at about $11 per share.
As of June 8, PSFE stock closed at $12.08 per share. That’s a market cap of $8.74 billion for a company that’s guiding for about $1.54 billion in revenue for all of 2021. Moreover, the company recently issued $1.02 billion of new debt due in 2029 in order to refinance existing debts.
iGaming in the States
To me, Paysafe looks like a small, specialty transaction processor. They saw almost no growth from the Covid-19 lockdowns in 2020, as online growth barely beat casino losses.
However, what has analysts pounding the table for Paysafe is iGaming itself. This has been a thing in Europe for a long time, but it’s still arriving across most of the U.S. because state legislators seem reluctant to grant licenses. So far, only 16 states allow some form of online gambling, while only five allow online casinos specifically.
The assumption here is that Paysafe — which is moving operations to Amazon’s (NASDAQ:AMZN) Amazon Web Services (AWS) Cloud — can navigate new state laws as they’re enacted. The addition of cryptocurrency as a payment mechanism is thought to be icing on the cake. But can this state-by-state strategy pay out for PSFE stock?
The Bottom Line on PSFE Stock
Currently, PSFE stock is priced at a forward price-sales (P/S) ratio of 5.77, based on assumptions of growth. The idea is that states are desperate for new money after the lockdowns and that Americans are eager to lose their paychecks from the safety of bed.
Even TV analyst Jim Cramer likes Paysafe. This is based on the reputation of Paysafe board chairman Bill Foley, who Cannae Holdings (NYSE:CNNE) was an early investor in the SPAC that took PSFE public.
Right now, though, the charts on PSFE remain negative. There’s time to consider it. If you’re a young blood who wants some action, however, feel free to take a flutter on this stock.
On the date of publication, Dana Blankenhorn held long positions in AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.