What happened

Paysafe (NYSE: PSFE) shareholders lost ground in the market last month as the stock fell 19% from a 0.55% rise in the S&P 500, according to data provided by S&P Global Market Intelligence.

The crisis has pushed investors in the payment processor deeper into the red, with stocks down around 20% so far this year, compared to a 12% increase in the broader market.

Image source: Getty Images.

So what

Investors weren’t thrilled with the latest results from the fintech company. Paysafe said on May 11 that revenue rose only 5% in the fiscal first quarter, with net losses remaining at nearly $ 50 million.

The payment volume increased by 8%, which is very much in line with management’s target. The losses also came as no surprise as Paysafe is busy investing in growth areas like online gaming. “We are delighted to deliver strong first quarter financial results,” CEO Philip McHugh said in a press release last month. “We have made excellent progress on our strategic initiatives.

Now what

McHugh and his team left their outlook for 2021 unchanged, and the poor reception of the shares by investors likely reflects hopes that the payments processor may have lifted its guidance instead. Its gaming niche in the United States has seen its revenue increase by 66%, after all, and Paysafe is gaining a foothold in cryptocurrencies.

The company’s latest earnings update did not threaten this larger growth story. In fact, Paysafe has a good chance of increasing both sales and profitability if its new financial bets work. The challenge for management is that Paysafe’s digital payment processing segment weighs down on the rest of the business. This division recorded a 13% drop in sales last quarter and a 30% drop in adjusted profits.

Executives said Paysafe can achieve double-digit sales growth on a sustainable basis amid rising profit margins. While the May earnings report showed no progress on either score, the company has just finalized its merger and has completed other changes like debt repayment and appointment of a new board of directors.

It’s not yet clear whether Paysafe’s new stance will contribute to the growth management is aiming for, so investors understandably took a step back from this fintech giant last month.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.



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