We came across a long thesis on Paysafe Limited (NYSE:PSFE) on ValueInvestorsClub by kismet. In this article we will summarize the bulls’ thesis on PSFE. The company’s shares were trading at $21.73 when this thesis was published, vs. closing price of $17.10 on Dec 31st.
Paysafe Limited (NYSE:PSFE) is an integrated payments platform with the core purpose of enabling businesses and consumers to connect and transact seamlessly through capabilities in payment processing, digital wallet, and online cash solutions. The company’s history is primarily an amalgamation of acquired payment processing businesses, historically focused on the internet gambling vertical. This focus stems from its origins as Neteller and its subsequent acquisition of Skrill.
The bull thesis is based on a potential turnaround after a poor start of the 2020s – the underperformance in 2021-2022 was largely driven by overly aggressive guidance, coupled with COVID-related pressures, negative impact from European gambling regulations as well as several aggressive acquisitions which the author believes have led to a spike in leverage and hence destroyed shareholder value. The turnaround strategy is centered around a new management team appointed at the start of 2022 – the new CEO shifted focus onto returning the business to growth, through leveraging the B2B and B2C aspects of each business and cross-selling products to the merchant or the consumer to create a stickier and higher value ecosystem. For the Digital Wallets product, the goal is to expand the audience beyond core gamblers by enhancing customer service and the user experience to levels comparable to PayPal.
The author believes the new management team has made significant progress so far. If the turnaround is successful, this could result in higher organic growth, wider margins and a $48.00 stock price by the end of 2026 assuming a rather conservative 7.5x target EV/EBITDA multiple. The price target implies a potential annualized price return of 67.7% until the end of CY2026.
While we acknowledge the potential of PSFE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PSFE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article was originally published at Insider Monkey.
Hedge Fund Resource Center