It was about one year ago when investors learned that Paysafe (NYSE:PSFE) was going public via the special purpose acquisitions company (SPAC), Foley Trasimene Acquisition II. And on March 31, PSFE stock made its debut. However, if you were an early investor in PSFE stock, you’re sitting on a loss. Paysafe is a fintech company and a leader in the online gaming sector.
There could be many explanations. One may simply be that investor sentiment for SPAC stocks has quickly soured. The stock delivered solid revenue in August, but investors seemed to expect that the company was going to deliver positive earnings. It did not. However, analysts expect Paysafe to grow earnings per share (EPS) by 112.50% in the next 12 months.
This leads me to believe that investors are confusing the company Paysafe it with the company they may want it to be. I dismissed this option in June. However, I’m running out of other reasons to explain PSFE stock’s lack of traction.
What Makes PSFE Stock Unique?
Since before the onset of the Covid-19 pandemic, the market has been a bit frothy. Commonly, investors will find companies that offer genuine innovation, but the stock is overvalued. Paysafe presents a different scenario.
What I mean is that, at first glance, there’s nothing necessarily unique about what Paysafe offers. For example, recently the company launched Paysafe Publishers, its affiliate marketing program. The company brands this as a “unique performance marketing network” for advertisers and affiliates.
I’m sure there are elements of the program that are unique to Paysafe. But the concept isn’t new. Both PayPal and Square offer affiliate marketing programs.
If that’s where the story ends, you could presume that PSFE stock is properly valued. And when you take into account the company’s voracious appetite for acquisitions, you can see why some investors may want to stay far away.
But this is where it’s important to see Paysafe for what it is. When you do, you can make a case that’s it’s undervalued. That’s a perspective that analysts seem to agree with.
And as a result, the stock is undervalued. But are investors looking at the right narrative?
The Best of the Rest?
That’s where it’s important to note that Paysafe isn’t going to be PayPal (NASDAQ:PYPL) or Square (NYSE:SQ). However, that doesn’t mean it should be easily dismissed. Paysafe is the clear leader in online gaming transactions. The company has several compelling partnerships. And it looks like the runway is clear, at least for now. PayPal and Square are showing no immediate interest in getting involved with online gaming.
Paysafe is also getting aggressively involved in cryptocurrencies. On the company’s most recent earnings call, the company announced its digital wallet accepted 37 cryptocurrencies in over 80 markets and is live on 30 exchanges.
Buy PSFE Stock on Expectations of Reasonable Growth
Colloquially, the phrase “best of the rest” is used as a pejorative to describe a company that is the first in a list of also-rans. But in the case of PaySafe, it might be a good place to be. The company doesn’t pretend to be something it’s not. And it seems to have very realistic growth projections.
The company is the clear leader in handling online gaming transactions. That’s a nice niche for the company to dominate. And while there’s nothing to prevent PayPal or Square from going after this business, PaySafe has a first move advantage at least for now.
Retail investors are still firmly in control of this stock and that means there’s always the chance for a short squeeze. This isn’t a new story. However, there’s no evidence that is happening yet. That doesn’t mean you shouldn’t buy PSFE stock; it’s just something to think about.
On the date of publication, Chris Markoch 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.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.
