As Paysafe guides lower on Q3 revenue, should you buy or sell?

Paysafe Limited (NYSE:PSFE) shares Monday plunged more than 13% after announcing its most recent quarterly results. The company reported fiscal Q2 revenue and earnings, beating analyst expectations on sales. However, Paysafe’s Q3 revenue guidance came below expectations, subjecting the stock price to decline significantly.

The company’s Q2 revenue grew 12.7% to $384.34 million beating the consensus Street estimate by $5.9 million. However, its Q3 revenue guidance of about $360 million to $375 million came short of the consensus expectation of $389.09 million. The company also expects full-year revenue in the range of $1.53 billion to $1.55 billion compared to the Street estimate of $1.55 billion.

Should you buy or sell Paysafe shares in Q3 2021?

From a valuation perspective, Paysafe shares trade at a steep forward P/E ratio of 65.38, making the stock expensive for value investors. However, its price-book ratio of 0.49 indicates the stock could be potentially undervalued. In addition, analysts expect Paysafe earnings per share to grow by a whopping 387.50% next year, making it an attractive option for growth investors.

Nonetheless, with the company’s top-line guidance for Q3 and full-year 2021 coming below expectations, there is a chance it could fail to meet next year’s analyst expectations on earnings. Therefore, it may be best to monitor its performance over the next few quarters before buying. 

Technical overview: Paysafe stock price predictions for August 2021

Technically, Paysafe shares seem to be trading within a descending channel formation in the intraday chart. The stock price has recently dropped closer to oversold conditions, but it is yet to cross below into the zone. Therefore, it could continue to decline following Monday’s disappointing topline guidance.

As such, investors can target extended declines at approximately $7.56 or lower at $6.31. The key resistance levels are $10.11 and $11.27.

Bottom line: the case for selling Paysafe shares now

In summary, although Paysafe shares have plunged significantly after a disappointing report, the downward movement seems poised to continue amid a significant bearish bias. 

Moreover, the company’s forward P/E ratio appears significantly steep for value investors. At the same time, it may also fail to meet next year’s earnings expectations after issuing weak top-line guidance for this year.