At first glance, Bermuda-headquartered Paysafe (NYSE:PSFE) might seem like a sensible company to own shares of. After all, PSFE stock is cheap and value seekers are supposed to “buy low, sell high,” right?
Besides, Paysafe has the veneer of a payments-market disruptor. It certainly won’t be easy to take on giant banks and more established payment platforms, but maybe Paysafe can manage to accomplish this gargantuan task.
Or, maybe it can’t. There’s no shortage of businesses already out there, vying to compete against the banking and payment-platform giants. It feels like every start-up is a “disruptor” or an “innovator” nowadays, but frankly, many of them won’t succeed in the long run.
Sure, you can speculate on Paysafe and hope that the company somehow manages to transform the digital payments experience as we know it. Much more likely, though, is another year of challenges and headaches for Paysafe’s long-term stakeholders.
PSFE Stock at a Glance
Things weren’t always so bad for Paysafe’s investors. As you may recall, Paysafe debuted for public trading on March 31, 2021, after completing its special purpose acquisition company (SPAC) merger with Foley Trasimene Acquisition II.
Prior to the SPAC merger announcement, the stock (which originally traded under the ticker symbol BFT) stayed close to $10. However, post-announcement, BFT/PSFE stock catapulted to $19.57 on Jan. 21, 2021.
Those were good times, no doubt, but they weren’t destined to last very long. Perhaps the folks who bought the stock near $20 weren’t paying attention to Paysafe’s financials — a crucial topic which we’ll cover in a moment.
In any event, PSFE stock broke below the $10 level in August of 2021. Oftentimes, it’s a bad omen when a SPAC stock declines below $10.
The next thing you know, the stock sliced through $5 and even $4. Clearly, the sellers were in control — and as of January 2022, they were still unstoppable.
Checking in on Jan. 27, 2022, PSFE stock was trading at approximately $3.25. There are really no historical support levels to speak of with this stock. So, it’s not realistic to expect a sustained bounce at this point.
Only Slightly Worse
Now that we’ve discovered the horror show that Paysafe’s investors have endured, let’s see what’s under the hood with the company, financially speaking.
Typically, a company’s financial press releases will show the “highlights” in bullet points near the top of the page. We’re using the word “highlights” loosely here, since Paysafe’s third-quarter fiscal results don’t offer much to get excited about.
One bullet point, for example, says, “Revenue of $353.6 million, decreased 1%.” So, that’s only slightly worse than last year’s result.
Another highlighted bullet point is, “Adjusted EBITDA of $106.4 million, decreased 1%.” Again, it’s not good but it’s also not terrible.
Then there’s the bullet point which say, “Revised outlook for full year 2021.” But is that positive news, or negative?
This is a perfect example of why informed investors should drill down to the details, and not just take the headlines and bullet points at face value.
As it turns out, Paysafe’s revision meant that the company lowered its full-year 2021 revenue outlook from $1.53 billion to $1.55 billion, to $1.47 billion to $1.48 billion.
And, it only gets worse when we examine Paysafe’s bottom-line results. In 2020’s third quarter, the company incurred a net earnings loss of $38,622,000.
That’s already problematic. What’s even more worrisome, though, is Paysafe’s much deeper net earnings loss of $147,106,000 in 2021’s third quarter.
Naturally, those stats weren’t found at the top of Paysafe’s quarterly press release. Burying the bad news doesn’t make it go away, however.
The Takeaway for PSFE Stock
Financial definitely matter, and they’re not looking good for Paysafe. Moreover, now that PSFE stock is on the other side of the hype phase, there could be much more downside ahead.
The lesson here is to look beyond the highlights and the bullet points. Sometimes, you have to dig deep to find the ugly truths. I give PSFE stock an “F” in my Portfolio Grader.
Paysafe might have been conceived based on an interesting idea. Still, not all disruptors are destined to succeed.
Hence, attempting a “buy low, sell high” strategy with PSFE stock isn’t recommended. With Paysafe, there’s just no assurance that the “sell high” moment will ever occur.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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