Specialized payments platform Paysafe (NYSE:PSFE) stock has been in a downtrend since its debut as a reverse merged SPAC business combination on March 31, 2021. The hype about its piece of the iGaming pie has worn off as revealed in its initial earnings release as a publicly-traded company. However, value may still be found on declining prices as shares become more affordable as markets tend to overreact on the way up and on the way down.
Stocks are weighted by the value they present based on the price. When price falls far enough, value can be found. This is the case where Paysafe may have had too many expectations and the market has lowered the bar decisively.
Paysafe is a play on digital payments and iGaming, both of which are expanding and growing. It’s also a secondary play on cryptocurrencies and the underbanked. Prudent investors seeking to capitalize on the primary and secondary tailwinds can look for opportunistic pullbacks for exposure.
Q1 FY 2021 Earnings Release
On May 11, 2021, Paysafe released its fiscal first-quarter 2021 results for the quarter ending March 2021. The newly minted public Company reported a net loss of (-$49.1 million), compared to a net loss of (-$51.1 million) in same period last year. Revenues rose 5% year-over-year (YoY) to $377.4 million, beating analyst estimates by $11.05 million. Total payment volume rose 8% to $27.7 billion. Adjusted EBITDA was flat at $113.2 million. The Company strengthened its balance sheet via debt repayment of $1.2 billion. North American iGaming grew 66% YoY, which the Company capitalized upon. Paysafe CEO Phillip McHugh stated:
“As we embark on our next chapter as a public company, we are pleased to deliver solid financial results in the first quarter, including continued strength from online and e-commerce volumes. Alongside this, we made excellent progress on our strategic initiatives across North American iGaming and emerging eCommerce verticals, while achieving milestones to further scale our platform and unlock value. Looking ahead, with our great market positions and unique two-sided network, we believe that Paysafe remains well-positioned to deliver consistent double-digit growth and drive operating leverages.”
Conference Call Takeaways
Paysafe CEO McHugh set the tone:
“From an overall market view, we continue to see lots of strong activity, online and e-commerce volumes continue to remain strong. We’re seeing rapid growth and lots of market activity in North American iGaming, with the legalization of sports betting in four new states planned in 2021, and several other states not far behind.”
He mentioned an 18% YoY volume increase in its U.S. acquiring business with “much higher” growth in April thanks to the recovery in U.S. small and medium-sized business. Additionally, CEO McHugh sees continued adoption of consumers to new payment methods points out a study indicating 60% of consumers had tried a new payment method in the last 12-months. He pointed out:
“First, we’re positioned to be the true winner in iGaming, which includes online sports betting, casino and poker, fantasy and eSports. In particular, we have a strong positions to win the fast emerging U.S. iGaming market… With 75% of our revenues coming from online payments, and our folks in specific industry verticals, we’re exposed to the fastest swim lanes of growth in the payments market.”
Russell 3000 Index Inclusion
PSFE was added to the Russell 2000 index on June 28, 2021. This was the driving force of its acceleration and gap to the $13.34 peak before proceeding to slide back down in the following days. This is providing an opportunity for risk-tolerant investors looking to gain exposure.
PSFE Opportunistic Pullback Levels
We use the rifle charts on the weekly and daily time frames to provide a short-term perspective for PSFE shares. The weekly rifle chart formed a top at the $14.99 Fibonacci (fib) level before starting a descent all the way down towards the $10.25 fib before attempting a recovery. The weekly market structure low (MSL) triggers above $12.28 as the 5 period moving average (MA) is flat at $11.82 with falling 15-period MA at $12.69.
The weekly stochastic formed a mini pup up through the 20-band. This sets up a weekly make or break as the bullish scenario would be a stochastic oscillation up through the 80-band as the weekly 5-period MA crosses up through the 15-period MA. The bearish outcome would be a weekly inverse pup breakdown as the weekly stochastic crosses back down under the 20-band sending shares towards the weekly lower Bollinger Bands near the $8.88 fib. The daily rifle chart has a falling 5-period MA at $11.93 and 15-period MA at $11.56 as the stochastic starts to cross back down. Risk-tolerant investors can look for opportunistic pullback levels at the $11.06 fib, $10.67 fib, $10.25 fib, $9.75 fib, $8.88 fib, $8.57 fib, and the $7.74 fib. Upside trajectories range from the $14.07 fib up towards the $18.50 fib.