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To call Paysafe stock a disappointment in 2021 would be an extreme understatement. While some aspects of the business performed well, new gambling restrictions in Germany which basically cut out the entire market was a major blow to Paysafe's revenue.
This resulted in a very bad miss on Q3 and a complete revision of their 2022 outlook which resulted in the stock dropping by over 50%.
However, sometimes chaos creates opportunity.
1st - Paysafe was way oversold on the bad news and is now trading at just 2X revenue. They do have more debt on the books than I'd like to see but they have ample Free Cash Flow and have been improving their margins each quarter with cost savings measures. They are not in any imminent danger of not being able to repay their debt or needing to do an offering to handle it.
2nd - The biggest impact to Paysafe in 2021 was losing the entre German gambling market which was by far the largest in Europe. Paysafe did a very poor job of explaining to investors how much revenue they brought in from Germany and therefore many were blindsided at the impact the regulations took.
However, an important distinction needs to be made between loosing market share to competitors and having a government remove a market from all players.
The incoming German chancellor is much more open to online gambling and of course many government officials are chomping at the bit to generate the income gambling taxes provide. At some point within the next 1 - 2 years it seems likely Germany will once again be a major player in online gambling and Paysafe is in a prime position to benefit greatly once that happens.
3rd - Their Digital Wallet (particularly hit hard by the German gambling laws) is at best an ok product right now. They do some things great, somethings quite poorly. They were able to ride on what they had because the European and in particular German gambling market kept it prompt up as it was very gambling focused.
With Germany at least temporarily removed from the equation, they have to find a way to grow it without them and that is where Chirag Patel comes in as the new CEO for the Digital Wallet.
You can learn more about Chirag here https://www.paysafe.com/us-en/about/leadership/meet-our-leaders/chirag-patel/ or track him down on some podcasting interviews he has done but the short of it is he comes from Amazon and Santander Group with an outstanding track record of growth.
I believe with his customer 1st centric approach and track record of success he will turn Paysafe's digital wallet around and we will start to see the benefits of that in Q3, 2022.
4th - Paysafe has two unannounced partnerships which will be revealed in Q1, 2022 that are very exciting. The first is a new gambling partnership which has been teased as a steal of a major player from a competitor to do full payment processing for.
We also know this gambling entity has some sort of brick and mortar presence and they want to convert their brick and mortar visitors to paying on their app while in the casino instead of paying with cash.
MGM, Caesars, Penn are of the first names which come to mind as strong possibilities, any one of which would be a major win both in terms of top line growth and the ability to steal away more major players from the competition.
Secondly there is an unannounced digital currency deal which I have some theories on what it may be but at this point it is pure speculation on my part from connecting dots which certainly holds some merit but as in the end there may be nothing there.
However, Paysafe is a large player in digital currency and does processing for many digital currency companies behind the scenes and they are touting this deal as "major" which we have not seen them say in the past so it seems logical that whatever this deal is, it's far bigger than something like the Coinbase/Visa deal they were a part of.
5th - While there other areas I could point out for strong growth coming in the later half of 2022 which I believe may catapult their stock higher than what I'm suggesting in this article, I want to stay moderate in the projections here and leave all hyperbole on the sideline.
Paysafe took a reset on their full year 2022 predictions and basically said at this point we expect to do in '22 what we had hoped to do in '21.
Well, it was over $12 a share on June 30th before the concerns of the coming Q3 ER started seeping in.
So if they just hit their bare bones projections (which they have already said they lowered as much as they did to ensure there was next to no chance they had another miss) it would make sense that by Q3 of '22 they are right back to where they left off at in June stock price wise, since they will be in the exact same position in terms of revenue growth.
After having re-listened to the Q3 ER call several times, reading through the twitter messages from Izzy their CFO, having re-listened to their CEO speak at the Cannae conference in December multiple times AND the fact that there was a strong wave of insider buying between Nov 12th - Dec 3rd, I believe Paysafe is going to easily meet all projections and strongly beat some of them over the next 3 quarters.
There is no logical conclusion one can come to that this stock will not be back above $8 come the Q3 ER if they do so and the risk at this point if there is more stumbling blocks along the way have been mostly mitigated by the fact they are already trading at a mere 2X revenue while maintaining strong Free Cash Flow.
In Conclusion - Paysafe is now a low risk, high reward play with a strong possibility to double to $8 or even triple to $12 within 1 year from it's current $4 price point.
I am long both Paysafe common stock and warrants at the time of this writing. The information presented herein is for entertainment purposes only and is not financial advice. Nothing in this article should be taken as advice or solicitation to purchase or sell any securities mentioned. I do not provide personal investment advice and I am not a qualified licensed investment advisor. I am an amateur investor and entertainer.