It figures that on one of the rare occasions I’m bullish on a speculative stock, I’m on the wrong side of investor sentiment. However, that appears to be the case with Paysafe (NYSE:PSFE) stock.
I’ve been convinced that Paysafe stock should stand out on the long list of SPAC stocks that have gone public.
But so far, the investment community at large doesn’t share my enthusiasm. On its first day of trading, PSFE stock closed at $9.95. Today, the stock still trades at less than $11. Momentum is clearly not on the company’s side.
But does this mean the bulls should throw caution to the wind? On the contrary, right now I think it’s best to take a step back and wait for some of the noise to go away.
Investors are Saying ‘Meh’ to PSFE Stock
Paysafe exists in the financial technology sector. And as a payment processing, company, the company is a cousin (although perhaps a still distant one) to traditional banking stocks. Among the big banks it’s becoming clear there are a couple that fit in the category of “the best.” After that there’s another group that makes up “the rest.”
With that in mind, I suppose that many retail investors are looking at PSFE stock as a poor substitute for PayPal (NASDAQ:PYPL) or Square (NYSE:SQ). If that’s genuinely happening, I can understand it. But I’m not sure that’s what’s happening. And more importantly, I don’t think it should be happening.
Paysafe is the leader in the iGaming market. This is a niche market that is expected to grow by leaps and bounds. And it’s a market that for now PayPal and Square have no plans to enter. The company is involved in other markets, of course. However, it’s the iGaming market that truly sets it apart.
However, it’s all fun and games until the short squeeze takes place. There’s a lot of noise around Paysafe. This suggests to me that there may be investors with less than serious intentions.
Beaten At Its Own Game
I find it amusing that a company that relies on iGaming for a considerable portion of its revenue seems to be getting torpedoed because it’s a “casino stock.” Nevertheless, it’s hard to find another explanation for the recent price action in PSFE stock.
That was the opinion of InvestorPlace editor Luke Lango who, like me, remains bullish on the stock. The company is not just one of many companies that processes payments in the iGaming space. It is far and away the leader in a sector that’s ripe for growth. In fact, Lango wrote, “If this happens, our numbers say this company could net about $1.5 billion in profits during the decade.”
That sounds like a stock that would interest investors. But, at least for now, PSFE stock seems lumped into the world of overvalued SPAC stocks.
Watch, But Wait, For a Better Entry Point
PSFE stock is down nearly 30% for the year and it’s down roughly 8% since the last time I analyzed the stock. At that time, I advised investors to jump in at a low price.
And right now, it would be easy to say investors should be greedy when others are fearful. It’s another thing to deny reality. Paysafe recovered from a drop of over 20% in May. But since closing at $12.34 on June 28, the stock has dropped over 13%.
That means, for the moment, the bears are in control and Paysafe resembles a falling knife. The company won’t report earnings until sometime in August. When they do, the narrative may change. Until then, it’s a good idea to wait until you can confirm a bottom.
Paysafe is a fintech company in a world where fintech companies are having an increasing role. In addition to its leadership in iGaming, the company services more industries. There are many reasons to like PSFE stock.
But the facts (and price movement) tell a different story. At least, for now. Keep Paysafe on your watchlist. But right now, it has to be a hold.
On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.