Paysafe (NYSE:PSFE) is supposed to be a disruptor in the personal finance market. This might sound exciting, but Wall Street is clearly unenthusiastic about PSFE stock.
Just to recap, Paysafe debuted for public trading on March 31, 2021, after completing its special purpose acquisition company (SPAC) merger with Foley Trasimene Acquisition II.
As we’ll see, there was a hype phase with PSFE stock. However, folks who jumped on the bandwagon at the wrong time were promptly punished as the hype phase faded.
They can hope for a recovery, but remember: hope is not a viable investing strategy. Indeed, there’s data to suggest that further downside could be in store for Paysafe’s shareholders.
PSFE Stock at a Glance
Post-SPAC-announcement, PSFE stock catapulted to a peak of $19.57 on Jan. 21, 2021. This, admittedly, was a bullish price move as the stock had previously traded at around $10 (when it was BFT stock).
The problem with chasing parabolic stock price moves is that you can get burned badly if the sentiment turns negative. Unfortunately, people who bought Paysafe shares at the wrong time learned this lesson the hard way.
The shareholders suffered a psychological blow when PSFE stock broke below the $10 level in August 2021. From a technical perspective, if a SPAC stock declines below $10, it’s a sign that further downside may be coming.
It shouldn’t be too surprising, then, that most of 2021 was rough for Paysafe’s investors. The share price settled below $4 at the end of the year, and it recently has moved toward $3.
It’s time, therefore, for investors to consider whether PSFE stock could someday be valued in pennies rather than in dollars. Sometimes, it’s best to just cut one’s losses and move on to more promising investment opportunities.
An Acquisition Spree
Sometimes investors cheer when a company buys out another company. Typically, the business that’s making the acquisition, will issue a press release touting the benefits of the buyout. However, the investors must decide for themselves whether these acquisitions are actually good news or bad news. Bear in mind that buying out another company can be an expensive proposition. So, there may be a great deal of risk involved.
How does this relate to Paysafe in particular? The company went on a spending spree, apparently, with four different acquisition-related events in 2021. Three of those events, believe it or not, too place in the month of August.
In March 2021, Paysafe completed its acquisition of International Card Services. Then, in August of that year, the company finalized its acquisition of Orbis Ventures S.A.C. Also in August, Paysafe entered into separate definitive agreements to acquire SaftPay and ViaFintech.
This is the type of spending activity one might expect from a company with fast-growing revenue and robust profits.
Yet, when we delve into Paysafe’s financial stats, the company doesn’t fit the profile of one that can afford to go on an acquisition spree. Consider that, according to Paysafe’s unaudited results, the company generated $370.3 million in 2020 revenue. Then, in 2021, Paysafe reported $371.7 million in revenue. Paysafe admitted that this result was “approximately flat.” Now, let’s turn to the company’s bottom-line result for 2021.
For the full year, Paysafe incurred a net earnings loss of nearly $111 million. To be perfectly honest, it doesn’t sound like Paysafe is in a good financial position to spend money like the company has been doing.
The company can put a positive spin on its acquisition spree, but Wall Street doesn’t seem to be convinced that Paysafe is on the right track.
PSFE stock had its moment of hype and hope, but that moment has passed. It’s time to be realistic, not optimistic, as Paysafe continues to operate at an earnings loss. Therefore, it’s perfectly fine to just avoid Paysafe and instead consider other financial-market opportunities. The share price might be headed toward $1, so don’t get caught holding a toxic asset.
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.