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Why Paysafe Stock Crashed Today

By Joe Tenebruso – Nov 11, 2021 at 2:33PM

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Lower profit projections led to painful losses for shareholders.

What happened

Shares of Paysafe (PSFE 6.94%) plunged on Thursday after the payments platform issued a forecast for sales and profit that fell well short of investors' expectations.

As of 2:15 p.m. EST, Paysafe's stock price was down more than 40%.

So what

Paysafe's revenue declined by 1% year over year to $353.6 million. That was significantly below Wall Street's projections, which had called for revenue of over $370 million. 

Paysafe chalked up the sales decline to weaker-than-expected results in its digital wallet segment, as well as risk management initiatives that led to the loss of some direct marketing customers in its integrated processing division. 

A downwardly sloping stock chart.

Paysafe's stock price fell sharply on Thursday. Image source: Getty Images.

All told, Paysafe's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also fell 1%, to $106.4 million. Its net loss, meanwhile, expanded to $147.2 million, compared to a loss of $38.1 million in the prior-year period, due largely to a $322.2 million impairment charge related to its digital wallet business.

Now what 

Worse still, Paysafe slashed its full-year financial outlook. Management now expects revenue of roughly $1.48 billion in 2021, down from a prior projection of about $1.54 billion. The company also cut its guidance for gross profit and adjusted EBITDA to approximately $875 million and $430 million, respectively, down from $950 million and $488 million.

Still, CEO Philip McHugh attempted to assure shareholders that Paysafe's digital wallet operations will recover and that other growth drivers will help the company achieve its long-term goals.

"While the recent trend will drive an adjusted financial outlook, we continue to see strong momentum across the business," McHugh said in a press release. "Our position to win in high growth and disruptive markets including online sports betting and crypto continues to accelerate, coupled with strong delivery against our cost and technology platform targets."

However, judging by the sharp decline in Paysafe's stock price, investors aren't so sure that McHugh and his team can deliver on their promises.

Joe Tenebruso 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.

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