It’s common for stocks to drop sharply after delivering disappointing earnings, but a 42% decline in a post-earnings session is nothing less than brutal. That, however, was the fate of Paysafe (PSFE) stock following last week’s print as the company’s Q3 results and outlook failed to impress.
So, where’s Paysafe heading from here?
Evercore analyst David Togut believes 2022 will be a “transition year with 2023 demonstrating the first potential proof points of improvement in the digital wallet business.”
Along with slashing his outlook, Togut also downgraded Paysafe’s rating from Outperform (i.e. Buy) to In Line (i.e. Hold), and cut the price target from $15 to $4. Even after last week’s sharp drop, the new figure still implies ~11% downside from current levels. (To watch Togut’s track record, click here)
Joining the underwhelmed crowd, RBC’s Daniel R. Perlin added, “Regulation in Germany and Holland, two key markets, are making it more difficult for gaming operators to profit, while limiting the number of licenses available; and pricing needs to be reset in certain markets/tiers to be more competitive.”
In the short-term the company plans to address the issues by focusing on a better customer experience along with adjusting prices to more resemble the overall market. Paysafe also intends to discard under-performing product features and tidy up the balance sheet. However, the company still expects the “weakness to continue” into Q4.
As such, Perlin believes management will need to “regain investors” confidence before the stock can meaningfully rebound.
In the meantime, the analyst reduced the price target from $15 to $9, which nevertheless, still suggests shares could double from here. Perlin’s Outperform (i.e., Buy) rating stays as is. (To watch Perlin’s track record, click here)
All in all, the Street’s analysts are split down the middle on this one, although the bulls have the edge; based on 4 Buys and Holds, each, the stock qualifies with a Moderate Buy consensus rating. On where the share price is heading, the outlook is more conclusive; the forecast calls for 12-month gains of 84%, given the average target clocks in at $8.31. (See PSFE stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.