Paymentus Holdings Inc Is in a High-Volume Market
The financial technology (fintech) space will continue to have strong tailwinds despite the current negative sentiment. One market that looks promising is the electronic bill presentment and payment (EBPP) segment.
The EBPP sector could process as many as 30.7 billion bills by 2027, up from 18.2 billion in 2020. That might even be a conservative forecast. (Source: “Global Electronic Bill Presentment and Payment (EBPP) Market Report 2021,” Business Wire, April 9, 2021.)
To get exposure to the EBPP space, investors might want to consider Paymentus Holdings Inc (NYSE:PAY). The company provides cloud-based bill payment technology to organizations in the utilities, financial services, insurance, government, telecommunications, and health-care sectors.
If you think about how many bills you’ve paid online, you’ll understand the massive potential of the EBPP industry. It has probably been well over a decade since I paid a bill in person.
The trend for EBPP solutions will likely continue as digitalization rises. The sector is expected to continue growing by double-digit percentages. The industry’s revenues are estimated to grow by 24.6% to $492.9 million this year and by 26.1% to $621.5 million in 2023. (Source: Paymentus Holdings, Inc. (PAY).” Yahoo! Finance, last accessed April 11, 2022.)
But while Paymentus Holdings Inc’s business potential is significant, the stock market doesn’t seem to agree. It has driven Paymentus stock down by a whopping 43% this year to a level where I see a compelling contrarian opportunity.
Recent Selling of PAY Stock Means Opportunity for Traders
After the initial surge to its record high in June 2021, Paymentus stock has struggled for direction.
Throughout the period since its initial public offering (IPO), PAY stock has failed to achieve any period of sustained strong relative strength. Paymentus stock has largely traded in line with its relative strength.
At this point, shares of Paymentus Holdings Inc are hovering in a containment zone below their first Fibonacci retracement level. PAY stock’s relative strength has been drifting between oversold and neutral. See the horizonal blue lines in the below chart.
The last time Paymentus stock saw relative strength at 70 was back in December 2021. Shares of Paymentus Holdings Inc moved above neutral for a brief time in February 2022. PAY stock’s relative strength appears to be edging lower toward 30, which could see it retest $18.00 and the low of $17.57.
I view this as an opportunity.
Chart courtesy of StockCharts.com
The Money Flow Index (MFI), which combines price and volume, supports a potential downside move toward $18.00 (see the bottom section of the above chart). For shares of Paymentus Holdings Inc to mount sustainable gains, the MFI needs to move to 80 and hold near that level.
Look for Paymentus stock to hold at its low just below $18.00. If this occurs, PAY stock could take a run toward its 50-day moving average at $23.15 and its first Fibonacci retracement level at $25.88.
Above this level is Paymentus Holdings Inc’s 200-day moving average at $26.86, a 50% Fibonacci retracement level at $28.43, and a 61.8% Fibonacci retracement level at $30.97.
The EBPP space has strong tailwinds that could benefit Paymentus Holdings Inc (and its shareholders).
Given its price deterioration, PAY stock looks attractive as a contrarian investment.