Editor's Note: U.S. markets as well as our Customer Service department are closed all day tomorrow, Jan. 1. We'll be back soon with your next issue on Monday morning. A Hypergrowth FinTech Company at the Overlap of iGaming and Digital Payments By Luke Lango and the InvestorPlace Research Staff What's better than one megatrend? Two megatrends. Whenever you find a hypergrowth stock at the convergence of two world-changing megatrends, you often find yourself a big-time winner. Just look at Shopify. The e-commerce solutions provider sits at the convergence of the digital shopping and decentralization megatrends. Over the past five years, Shopify stock has surged nearly 4,500%. Or consider The Trade Desk – the programmatic ad platform that finds itself in the overlap of the digital advertising and big data megatrends. That stock is up almost 5,000% from its 2016 IPO price. Okta is another example. The identity security pioneer sits in between the cybersecurity and work-from-home megatrends. The result? A 1,500% surge in the stock from its 2017 IPO price. The list goes on and on. The lesson remains the same. Hypergrowth companies at the convergence of two megatrends can produce enormous returns in the stock market. In today's edition of The Daily 10X, we will tell you about one such company. It's an integrated payments platform that – by situating itself at the convergence of the iGaming and digital payments megatrends – is optimally positioned to follow in the footsteps of Shopify, The Trade Desk, and Okta, and score you huge gains over the next several years. Turning into the Ubiquitous Digital Wallet of Sports Betting One big megatrend we are super bullish on is the iGaming megatrend, or the shift towards legalized online gambling and sports betting, everywhere. Long story short, shifting legislation which started with the overturning of PAPSA in 2018 is paving the path for casinos to be virtualized over the next decade, much in the same way malls and movie theaters were virtualized over the past decade. The U.S. iGaming market is expected to grow by more than 50% per year over the next five years. Another explosive megatrend we are really excited about is the Digital Payments megatrend, or the shift away from cash and towards alternative payment methods. The story here is all about increasingly tech-centric consumers shunning cash and using e-payment platforms like PayPal and Apple Pay to pay for goods, both online and in-store. The global digital payments market is expected to grow by nearly 15% per year over the next four years. Needless to say, a high-quality growth company that finds itself at the intersection of these two emerging megatrends will be a big winner over the next few years. Paysafe is that company. Paysafe – who is set to go public via a merger with special purpose acquisition company Foley Trasimene Acquisition Corp. II (BFT) – is an integrated payments platform which provides many of the same digital payment services that PayPal and Square provide, such as: - Enabling users to upload, store, withdraw, and pay funds from a digital wallet.
- Empowering consumers to buy things online and in apps.
- Enabling merchants to accept non-cash payments across multiple channels.
It is, for all intents and purposes, a mini-PayPal. But there's one big thing that separates Paysafe: Its marriage with iGaming. For years and years, incumbent payment service providers like PayPal and Square shunned the iGaming market, on the idea that it was too niche and too risky. Paysafe didn't. In fact, Paysafe did the exact opposite, and turned PayPal and Square saying "pass" to iGaming, into an opportunity to turn into the payment technology backbone of the industry. And so, here we are in 2020, and Paysafe has indeed turned into the ubiquitous digital wallet for all-things-online-gambling-and-sports-betting. If you're in the iGaming world, chances are you're a Paysafe user. The company counts DraftKings, Bet365, William Hill, Betfair, and many more as customers. In the United States, Paysafe has partnerships with over 60 iGaming operators that together represent 75% of the market. This early leadership is important, because the payment execution risks associated with iGaming are exceptionally unique to iGaming – meaning Square and PayPal cannot leverage their expertise in facilitating t-shirt sales, to create a winning formula for facilitating sports betting transactions. No. There's only one expert at doing that, and it's Paysafe. In other words, while PayPal and Square are busy fighting over the global retail sales pie in the digital payment megatrend, Paysafe has crafted a defensible niche for itself in the iGaming sub-vertical of that megatrend. The implications for Paysafe stock are enormous. Paysafe controls about 0.4% of the global e-retail sales pie today, with its biggest market (U.S. iGaming) measuring just $3.4 billion in 2019. That number is expected to rise nearly 15X to $47 billion in 2025, and could easily touch $100 billion by 2030. Given that hypergrowth trajectory, Paysafe could easily scale to 1% global e-retail sales share. Assuming so, my numbers say there is visibility here for the company to net about $1.5 billion in profits sometime this decade. PayPal stock normally trades around 35X forward earnings – which, on $1.5 billion in net profits, implies a potential future valuation for Paysafe of over $50 billion. That's up about 5X from the current $10 billion market cap. So… could this emerging growth stock follow in the footsteps of Shopify, The Trade Desk, and Okta, and leverage two megatrends to score enormous returns? Absolutely – meaning that Paysafe stock deserves to be on your buy radar today. | Key Company Details | | Company Name | Foley Trasimene Acquisition Corp. II | | Ticker Symbol | BFT | | Share Price | $15.23 | | Current Market Value | $3 Billion | | Annual Revenue | N/A | | Catalyst | iGaming & Digital Payments Megatrends |
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