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While Square and PayPal get all the attention, an under-the-radar fintech company could be one of the biggest winners of the economy reopening this year.
I’m not talking about a small company either. This company processed more than $44 billion in transaction volume in 2020 and plans to almost double that by 2022. It’s projected to grow its revenue 25% just this year.
Payoneer (NASDAQ: FTOC), which recently went public via SPAC, is still trading close to its net asset value (NAV), providing a great opportunity to invest in a growing company and industry with a strong team. Scott Galit, the CEO, was previously an SVP at MasterCard, and the CFO, who has been with the company since 2011, spent five years with HSBC as a VP.
With the stock trading under $11, this price also means you have the opportunity to acquire shares at prices close to institutional investors such as Millennium Management and Dragoneer, a rare opportunity.
That’s especially important in the world of SPAC investing right now, with many ballooning well above their NAV only to fall back to earth.
While the financials of the SPAC deal make this an exciting opportunity, what’s really fueling the fire is the company itself…
Why Payoneer Could Win Big in 2021
Founded in 2005, Payoneer is a payment processing company that allows customers and business to easily transfer funds to each other around the world. It processed $44 billion in payments in 2020, up over 200% since 2017.
This growth is expected to continue, and it projects growth rates over the next several years to be similar to both PayPal and Square at 25%. During the merger announcement, it also pointed out that it is at an inflection point of growth with over 100% retention. This means that volumes are truly recurring, giving some nice downside protection.
Despite profit margin projected to level out at 72%, transaction profit will continue to grow as volumes increase. The market opportunity here is huge with U.S. e-commerce volume of $9 trillion and global volume of $26 trillion.
We could see growth rates even improve above suggested rates as they work with companies like Airbnb Inc. (NASDAQ: ABNB) that could see explosive growth as the economy opens back up and everyone is looking to get out of the house for a vacation.
Not only could we see Payoneer boost growth with the economy reopening, but it also works with marketplaces such as Fiverr that are supporting the freelance revolution. Estimates range widely on the number of full- and part-time freelancers operating in the United States, but Upwork estimates that number could be above 60 million.
Not only does it work with small companies, but Payoneer also works with Amazon, Google, and Walmart and currently claims 5 million customers have used the platform since it started operating in 2005. With a market of 400 million small- and medium-sized businesses as an addressable market, there is plenty of room to grow.
Payoneer has done a lot to build its platform over the last 15 years, and with a significant portion of B2B payments all over the world still done by wires and checks, Payoneer could be a key beneficiary. When the SPAC merger is complete, it will have $563 million cash on hand for both acquisitions and getting itself into a stronger market position to take part in the global shift to digital commerce.
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About the Author
Alex Kagin is the Director of Technology Investing Research at Money Map Press. He has spent the last decade working in equity research, most recently with Energy Capital Research Group (ECRG), where he led technology stock research along with working as part of a team developing a customizable financial data platform for securities analysis.
Prior to joining ECRG, Alex spent 8 years at DeMatteo Research, a boutique primary research firm and broker-dealer servicing the institutional investment community. He managed the Tech, Media, and Telecom vertical where he spent time connecting with hundreds of tech executives and hedge funds to get the pulse of the market.
Alex has a B.S. in Economics from American University and previously held Series 7 and 63 security licenses.