After much fanfare since its de-SPACing, Paysafe (NYSE:PSFE) is now trading below its initial $10 price. The stock reached its current price level of almost $8 after entering a downtrend from its highs of $18 in the beginning of the year. PSFE stock continues to be inside this downward trading channel. I believe that there is a potential investment opportunity here despite the negative sentiment.
The company recently announced a partnership with Fubo Gaming (NYSE:FUBO), a major win for the payments platform.
The popular streaming company is gearing up to launch its mobile sportsbook, paving the way for online gambling on its platform. The mobile sportsbook is expected to launch in the fourth quarter 2021.
PSFE Scores a Major Win With Fubo Partnership
Fubo will lean on Paysafe to provide the necessary technology for credit and debit card payments and other eCash solutions. By using Paysafe’s “best-in-breed” payment gateway, gamers are able to conveniently fund their Fubo sportsbook in multiple ways.
Also, they can deposit using a credit card, debit card, or ACH (automated clearing house) bank transfers from a regular bank account. Users also have the option to use Skrill and fund their accounts via their digital wallets. They can even use cash via the company’s Paysafecard or Paysafecash products available for purchase at thousands of retail shops.
Moreover, Paysafe’s solutions have drastically improve the speed and ease of payouts. Because of the company’s systems, real-time transfers to players’ bank accounts are possible. So are direct payouts to a Skrill Visa prepaid card for cash withdrawals via ATM.
I am very bullish on Fubo as I believe the sportsbook can change the way viewers experience sports. By being able to place wagers easily while watching fuboTV, viewers can become active participants in the spectacle. This will in turn drive engagement metrics.
Online Sports Betting Means for PSFE Stock
Online sports betting is forecasted to grow rapidly in the U.S. as it becomes legalized in more states. Researchers forecast that the U.S. sports betting market has the potential to surpass $19 billion annually. I am happy to see Paysafe land this deal as Fubo has the potential to be a winner in this new industry. This in turn will be very profitable for Paysafe and send PSFE stock higher.
In a statement, Paysafe management reiterates, “Our comprehensive range of payment solutions, with a strong emphasis on fast and frictionless deposits and payouts, will be key for Fubo Sportsbook’s interactive wagering model, and we look forward to providing strong support to the brand’s launch in Q4 and its future growth.” If this partnership with Fubo works out well, Paysafe might be able to land more clients.
PSFE Stock Could be Undervalued
Apart from the massive growth opportunity, there is a lot to like about Paysafe. Digging into the company’s financial results, it can be seen that PSFE stock could be potentially undervalued. In Q2 2021 the company generated EBITDA of $118.8 million, hitting the upper end of its $110 million – $120 million guidance. The relatively high EBITDA number means that unlike a lot of high-growth companies, Paysafe is profitable on an operational level. The company generated free cash flow of $54.6 million in the same quarter.
Paysafe has an adjusted EBITDA guidance of $480 million – $495 million for 2021 and with a margin of 32%. I believe the company is well on track to hit this guidance. With a market cap of $5.6 billion, PSFE stock is trading at roughly 12x 2021 EBITDA. That’s cheap in this frothy market environment for high-growth stocks.
Investor Takeaway
The FinTech industry continues to disrupt the monopoly systems once held by large banks. This disruption is a mega-trend that will unfold over the next couple of years. I believe that PSFE stock is a good investment in this space. The stock is trading at a reasonable valuation with plenty of potential upside.
On the date of publication, Joseph Nograles held a long position in FUBO. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joseph Nograles is a part-time freelance copywriter focused on the financial industry. He has worked in a wide variety of industries from tech to consulting with one of the “big four.” He has always enjoyed analyzing businesses and has been a CFA charterholder for nearly a decade now.