Time to Look at Beaten-Down PAY Stock
One of the hardest-hit areas of the technology stock market is the electronic payment sector. ETFMG Prime Mobile Payments ETF (NYSEARCA:IPAY) went down by about 30% in 2022 and down by about 45% from its record high, which was set in April 2021.
Financial technology (fintech) companies were flying high in 2020 and 2021 as the COVID-19 pandemic took hold and forced many transactions into the virtual world. One area of fintech that was growing even before the pandemic is the electronic bill presentment and payment (EBPP) market.
The EBPP sector could process as many as 30.7 billion bills by 2027, compared to 18.2 billion in 2020. This estimate might be conservative. (Source: “Global Electronic Bill Presentment and Payment (EBPP) Market Report 2021,” Business Wire, April 9, 2021.)
Chart courtesy of StockCharts.com
The bullish tailwinds in the EBPP market should benefit Paymentus Holdings Inc (NYSE:PAY).
The company provides cloud-based bill payment technology to high-transaction-volume businesses such as utilities, financial services companies, insurance firms, governments, telecommunications companies, and health-care providers. (Source: “Corporate Overview,” Paymentus Holdings Inc, last accessed December 30, 2022.)
So far, Paymentus has recorded two consecutive years of double-digit-percentage revenue growth.
|Fiscal Year||Revenues (Millions)||Growth|
(Source: “Paymentus Holdings Inc.” MarketWatch, last accessed December 30, 2022.)
Moreover, in the trailing 12 months as of December 30, 2022, the company’s revenue surged to $473.0 million. (Source: Paymentus Holdings, Inc. (PAY).” Yahoo! Finance, last accessed December 30, 2022.)
Analysts expect Paymentus Holdings Inc to continue increasing its revenues by double-digit percentages. They estimate that the company’s revenues grew by 24.2% to $491.4 million in full-year 2022. They also forecast that its revenues will grow by 25.5% to $616.5 million in 2023.
This translates to an attractive forward multiple for Paymentus Holdings Inc of 1.8 times its consensus 2023 revenue estimate.
Paymentus Holdings Inc Shows Superb Risk/Reward Trade-Off
Despite Paymentus’ solid fundamentals, the stock market doesn’t seem convinced. Paymentus stock went down by about 75% in 2022 after trading at $39.23 in June 2021. Currently below $10.00, I like the risk/reward opportunity with PAY stock, particularly for contrarian investors.
Shares of Paymentus Holdings Inc surged to their record high in 2021, faced price weakness, and subsequently mounted another move toward their high.
After failing to break higher on its second attempt, Paymentus stock experienced a bearish double top. That was followed by the emergence of a death cross pattern on PAY stock’s chart in March 2022.
After that, Paymentus stock entered a bearish downward channel, falling to its recent lows. Along the way, PAY stock made several attempts at breaking out of channel resistance, but it failed on all attempts.
Chart courtesy of StockCharts.com
An encouraging sign is that Paymentus stock might have recently established a new base. If shares of Paymentus Holdings Inc can hold at this base level, I expect another attempt at its trendline resistance level around $12.50 to $13.00.
Before this happens, watch PAY stock’s 50-day moving average of $10.27. Above its channel resistance level is its 200-day moving average of $13.79.
If shares of Paymentus Holdings Inc can break above their 200-day moving average, they could move toward their horizontal 61.8% Fibonacci retracement level at $20.17, representing a double. Above this are key levels of $23.72 and $27.38.
The EBPP space has strong tailwinds that could benefit Paymentus Holdings Inc.
Given Paymentus stock’s significant price deterioration, it currently looks attractive for contrarian investors.