BTIG maintains Paysafe Buy rating, sees $40/share potential

On Thursday, BTIG analyst Andrew Harte maintained a Buy rating on Paysafe stock (NYSE:PSFE) with a $26.00 price target. This affirmation came in the wake of reports from Bloomberg that Paysafe is exploring the possibility of a sale. Harte suggested that the company could be valued at up to $40 per share if a transaction occurs. According to InvestingPro data, the stock has shown strong momentum with a 40% return over the past year, currently trading at $23.50.

Harte believes that strategic buyers are more likely to be interested in acquiring Paysafe rather than financial buyers, given Paysafe’s current leverage profile, which was 4.7x as of the third quarter of 2024. He draws a comparison to a similar company, Nuvei (TSX:NVEI), an e-commerce-focused payments company that was acquired last year at a multiple of 12x EV/EBITDA. InvestingPro analysis shows Paysafe’s current EV/EBITDA multiple at 8x, with the company generating $430.6M in EBITDA over the last twelve months.

Despite Paysafe having higher leverage and slower growth compared to Nuvei, Harte posits that even a 9x EV/EBITDA multiple in a potential sale scenario could justify a stock value of approximately $40. The analyst’s projections are based on the company’s financials and market comparisons. InvestingPro data indicates the company maintains a "GOOD" overall financial health score, with revenue growing at 8.2% year-over-year. Based on InvestingPro’s Fair Value model, the stock currently appears undervalued.

Paysafe, listed on the New York Stock Exchange, operates in the digital payments space, offering services that cater to businesses and consumers alike. The company’s consideration of a sale could attract various bidders interested in its payment processing capabilities and market position.

Harte’s reiteration of the Buy rating and price target reflects his confidence in the value proposition of Paysafe, especially in the context of a sale. The company’s future, in terms of ownership and valuation, is currently under speculation as it reportedly considers strategic options.

In other recent news, Paysafe has reported a steady increase in its financial growth during its Third Quarter 2024 Earnings Conference Call. The company’s revenue grew by 8% year-over-year, reaching $427 million, and its adjusted EBITDA rose by 1% to $117.8 million. Furthermore, Paysafe’s net leverage ratio improved, and the company maintained its 2024 revenue and adjusted EBITDA guidance, indicating confidence in its financial outlook and ongoing strategic projects.

In other recent developments, an RBC analyst noted an optimistic shift in the sentiment of American small and medium-sized businesses (SMBs), which is expected to spur technology investments. This positive sentiment is attributed to slowing inflation growth, reduced interest rates, and anticipated benefits from fiscal policies. Companies such as Block Inc., Toast (NYSE:TOST) Inc., Lightspeed Commerce Inc., Shift4 Payments Inc (NYSE:FOUR)., Fiserv Inc (NYSE:FI)., Global Payments (NYSE:GPN) Inc., Paysafe Ltd., and PayPal Holdings Inc (NASDAQ:PYPL). are identified as potential beneficiaries of this trend.

Particularly, Paysafe, with its significant SMB exposure, is poised to benefit from this trend, especially with its recent focus on expanding its sales force. Similarly, PayPal is expected to improve transaction margins through its efforts in the SMB market, with a more optimistic environment likely aiding the reception of its recent price increases. These are some of the recent developments that investors should consider.

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