Please ensure Javascript is enabled for purposes of website accessibility

Why Paysafe Stock Fell 19% in May

By Demitri Kalogeropoulos - Jun 7, 2021 at 1:43PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investors weren't happy with the company's latest earnings update.

What happened

Paysafe (PSFE -2.21%) shareholders lost ground to the market last month as the stock fell 19% compared to a 0.55% uptick in the S&P 500, according to data provided by S&P Global Market Intelligence.

The slump pushed investors in the payments processing specialist deeper into the red, with shares down about 20% so far this year compared to a 12% increase in the broader market.

A woman holds a smartphone in one hand and her credit card in the other.

Image source: Getty Images.

So what

Investors weren't thrilled with the latest results from the fintech company. Paysafe said on May 11 that revenue inched higher by just 5% in the fiscal first quarter as net losses held at close to $50 million.

Payment volume rose 8%, which was right around management's target. The losses weren't a surprise, either, as Paysafe is busy investing in its growth areas like online gaming. "We are pleased to deliver solid financial results in the first quarter," CEO Philip McHugh said in a press release last month. "We made excellent progress on our strategic initiatives."

Now what

McHugh and his team left their 2021 outlook unchanged, and investors' sour reception of the stock likely reflects hopes that the payment processor would instead have lifted its forecast. Its U.S. gaming niche saw a 66% revenue spike, after all, and Paysafe is gaining a bigger foothold in cryptocurrencies.

The company's latest earnings update didn't threaten that broader growth story. In fact, Paysafe has a good shot at growing both sales and profitability if its new financial bets work out. The challenge for management is that Paysafe's digital payment processing segment is weighting down the rest of the business. That division reported a 13% sales decline last quarter and a 30% drop in adjusted profits.

Executives have said that Paysafe can sustainably achieve double-digit sales growth in the context of rising profit margins. While May's earnings report didn't show progress on either score, the company has just completed its merger and has finished making other changes like paying down debt and appointing a new board of directors.

It's not clear yet whether Paysafe's new posture will help deliver the growth that management is targeting, and so investors understandably took a step back from this fintech giant last month.

Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Paysafe Limited Stock Quote
Paysafe Limited
PSFE
$2.21 (-2.21%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
402%
 
S&P 500 Returns
129%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.