What happened
Paysafe (PSFE -1.28%) shareholders lost ground to the market this week. The payments processing specialist's stock was down 16% through early-Friday trading, compared to a 1.6% rally in the S&P 500.
That drop added to a tough year for Paysafe investors. The stock is down 19% in 2023, according to data provided by S&P Global Market Intelligence, compared to the wider market's 9% increase.
This week's decline came as Wall Street digested Paysafe's latest earnings update.
So what
Management revealed in a Tuesday press release that sales landed at $388 million in the Q1 period that ended in late March. This result met executives' targets and reflected solid demand for products like its digital wallet service and e-commerce platforms. "We kicked off 2023 by delivering our strongest quarterly revenue since going public," CEO Bruce Lowthers said in a press release.
Yet Paysafe's business remained in the red, with net losses of $4 million compared to a loss of over $1.1 billion a year ago. On a non-GAAP (generally accepted accounting principles) basis, adjusted earnings increased 5%. Operating cash flow was negative, but Paysafe generated positive free cash flow.
Now what
Investors may have been disappointed with the company's updated 2023 outlook. Executives still see sales landing at roughly $1.6 billion this year, compared to last year's $1.5 billion. The mid-single-digit increase would follow last year's sluggish 1% uptick.
Fans of the fintech niche might be attracted by Paysafe's cheaper stock price in 2023. Yet its slow growth, net losses, and significant debt holdings all add risk around the business. The potential for a recession dampening demand for digital commerce is another reason to worry about Paysafe's short-term results.
These factors make Paysafe's stock a better one to watch, rather than buy, for most investors right now.
