Yahoo Finance Earnings Release: Here's Why Analysts Cut Their Paysafe Limited (NYSE:PSFE) Price Target To US$3.78
It's been a mediocre week for Paysafe Limited (NYSE:PSFE) shareholders, with the stock dropping 14% to US$2.37 in the week since its latest first-quarter results. Overall the results were a little better than the analysts were expecting, with revenues beating forecasts by 2.1%to hit US$368m. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Check out our latest analysis for Paysafe
After the latest results, the nine analysts covering Paysafe are now predicting revenues of US$1.54b in 2022. If met, this would reflect a modest 4.2% improvement in sales compared to the last 12 months. Statutory losses are forecast to balloon 28% to US$1.21 per share. In the lead-up to this report, the analysts had been modelling revenues of US$1.54b and earnings per share (EPS) of US$0.083 in 2022. So despite reconfirming their revenue estimates, the analysts are now forecasting a loss instead of a profit, which looks like a definite drop in sentiment following the latest results.
With the increase in forecast losses for next year, it's perhaps no surprise to see that the average price target dipped 25% to US$3.78, with the analysts signalling that growing losses would be a definite concern. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Paysafe, with the most bullish analyst valuing it at US$7.00 and the most bearish at US$2.00 per share. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how analysts think this business will perform. With this in mind, we wouldn't rely too heavily the consensus price target, as it is just an average and analysts clearly have some deeply divergent views on the business.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Paysafe's past performance and to peers in the same industry. It's clear from the latest estimates that Paysafe's rate of growth is expected to accelerate meaningfully, with the forecast 5.6% annualised revenue growth to the end of 2022 noticeably faster than its historical growth of 2.3% over the past year. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 13% per year. It seems obvious that, while the future growth outlook is brighter than the recent past, Paysafe is expected to grow slower than the wider industry.
The Bottom Line
The most important thing to take away is that the analysts are expecting Paysafe to become unprofitable next year. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Paysafe's revenues are expected to perform worse than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.
With that in mind, we wouldn't be too quick to come to a conclusion on Paysafe. Long-term earnings power is much more important than next year's profits. We have forecasts for Paysafe going out to 2024, and you can see them free on our platform here.
You should always think about risks though. Case in point, we've spotted 1 warning sign for Paysafe you should be aware of.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
