The Nasdaq-100 technology index has dipped into bear market territory a couple of times in 2022 already. But bargain hunters have swooped in, pushing the market higher and narrowing its year-to-date loss to just 12% as of this writing.
Some of investors' underlying concerns still remain, with interest rates ticking higher and geopolitical tensions in Europe causing uncertainty. But history suggests buying into stock market weakness with a long-term time mindset is a great way to generate positive returns.
With that said, Redfin (RDFN -0.74%) and Paysafe (PSFE -1.28%) have fallen 78% and 80%, respectively, from their all-time highs, but some analysts on Wall Street remain bullish, predicting they could double (or more). Here's why.
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Redfin: Implied upside of 329%
Selling your home can be intimidating, which is why most people rely on real estate brokers to handle the process for them. But this comes at a steep cost of up to 2.5% of the total sale price, which can equate to tens of thousands of dollars in fees. Redfin is an innovative real estate company with an army of 2,485 brokers across the U.S., and that level of scale allows it to charge a listing fee of just 1%, saving its clients over $1 billion since inception.
In 2021, Redfin was responsible for 1.16% of all home sales in America. That figure might seem small at face value, but considering there are over 106,000 real estate brokerage companies across the country, Redfin is doing more than its fair share of business. And charging lower listing fees hasn't hampered the company's ability to generate staggering growth, with its $1.92 billion in 2021 revenue representing a 116% increase over its 2020 result.
But Redfin stock has been hammered recently, and it's not only because of the broader tech sell-off. Investors are concerned about the iBuying practice, which involves Redfin purchasing homes directly from sellers and flipping them for a profit. It makes up 45% of the company's revenue, but the segment is barely making any gross profit -- and that's the problem. Redfin's key competitor, Zillow Group, exited this business in 2021 after suffering enormous losses, which has shaken confidence in the broader industry.
Holding an inventory of homes can be risky, as any drop in the housing market can result in catastrophic financial consequences. So far, Redfin has managed to maintain its iBuying business at a break-even point, but as interest rates tick higher and home prices level off, it could be at risk of losing money. The good news is that Redfin's brokerage business is incredibly healthy, generating $393 million in gross profit on $1.04 billion in revenue during 2021, and that's supporting the company overall.
Analyst firm Truist Securities thinks Redfin is in a great position even despite the challenges, attributing an $88 price target to the company's stock. That represents 329% upside from where it trades today.
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Paysafe: Implied upside of 145%
It's no secret that online gambling is rapidly spreading across America. It was once forbidden, but 32 states have now legalized online sports betting, and fans are flocking to get in on the action. For investors, global payments platform Paysafe is a great way to play the rise of this industry.
Paysafe owns payments brands including Neteller and Skrill, which are popular among online bookmakers and casinos. In 2021, the company added some big-name brands to its customer portfolio, like DraftKings, Caesars Entertainment, and Wynn Resorts' WynnBET. That's on top of existing blockbuster deals with companies like European powerhouse Flutter Entertainment, which owns the popular PokerStars brand.
But it's not just bookmakers leveraging Paysafe's technology. Cryptocurrency exchange Binance also white-labels the platform to facilitate its customers' transactions.
Paysafe processed $122 billion worth of payment volume across all segments in 2021, a 22% increase from 2020. But its revenue of $1.48 billion grew just 4% over the same period, and the company anticipates 2022 will be another transition year focused on staging for the enormous opportunity ahead, as online gambling continues to sweep across the U.S.
In fact, Skill payment volume in America tripled between Q3 and Q4 2021, and it will likely get better as Paysafe leverages a marketing opportunity with Barstool Sports.
Wall Street firm Susquehanna thinks Paysafe stock could soar 145% to $9, but over the long term, that might even be conservative.
