Summary In my follow-up on Payoneer, I'm upgrading my prior hold rating to a buy. This is slightly lower than today's Wall Street and analyst consensus of strong buy. Future upside could come from macro demand for digital payment solutions and the increasing role of stablecoin. The company has proven itself so far to grow cash flow and generate profits while reducing long-term debt to $0. Though it is not a dividend payer, the company does reinvest into share buybacks. The risk of recession and its impact on payment volumes has been discussed. The Stock: A Global Name in Fintech And Payments On the heels of having gone to an AI-related conference recently, and planning to attend an innovation summit featuring fintech startups and topics in a few weeks, I think a sector to talk about today is fintech, and for this article I picked Payoneer ( PAYO ), a NYC-based fintech firm offering a "payment infrastructure platform." In my last coverage of this stock last December, I had a neutral view, and afterwards the share price did see a gain for a while, before diving downward again, as you can see in the chart below: PAYO - price since last rating (Seeking Alpha) What I initially liked about the firm was positive macro forecasts for payment gateway providers, as well as the company's lack of long-term debt at the time. Payoneer had some news this summer, as reported in PRnewswire , announcing a "strategic partnership with programmable financial services company Stripe. The collaboration marks an expansion of Payoneer's Online Checkout offering for cross-border merchants looking to sell direct-to-consumer." Although Payoneer has a portfolio of various solutions, one of them to use as an example is a way for freelance professionals to get paid by clients digitally: PAYO - freelance payment solutions (company website) My goal with today's article was to take a closer look at the fintech and payments sector, and the company's own metrics, as well as some peers, to determine whether my prior hold rating should be modified. The Thesis: Not Too Late To Bet On The Digital Payments Revolution Based on my research today, I'm calling this stock a buy, which is actually an upgrade from my prior hold rating, and this worksheet below summarizes what factors drove that score: PAYO - rating worksheet (author) My shortened thesis today is that this stock is uniquely positioned to serve macro-level demand for digital payment options expected to grow, with top-line growth indicators and an attractive balance sheet profile and strong upside forecasts. However, what kept it from being a strong buy is that its profit margins have been trailing some key peers, it is not a dividend payer, and we should consider competition from large payment names like PayPal. The Sector: Macro Trends Like AI, Digital, And Stablecoin Are Already Familiar to Payoneer Payoneer is an interesting case because it forges two sectors that I have quite some experience in, technology and financial, and the niche it falls into is transaction and payment processing services. In fact, some years before I began writing for Seeking Alpha, I was actually an IT analyst/contractor at financial firm Charles Schwab ( SCHW ), and since then I increasingly have been following both financials and tech. Some key peer comparables in this space I selected include: Block ( XYZ ) which is the parent behind Square and CashApp, PayPal ( PYPL ), and Western Union ( WU ), all of which deal in various payment transaction solutions. I'll use these comparables in a few sections of this article. The reality that this sector has had to adapt to is increasing trends towards digital and mobile payments. Data site Statista has said in July, for example, that: In a survey conducted between April 2024 and March 2025, some 17 percent of respondents in the United States stated that they had paid with their smartphone for everyday purchases in the past 12 months. Further, there is the increasing role played by Bitcoin and stablecoin payments in this industry. Speaking personally to fintech industry expert Roy Sheinfeld, the founder of Breez Technology , whose SDK (software development kit) allows developers to integrate self-custodial Lightning Network payments into their apps and services, here is some commentary he shared with me: In payments, the near-term shift is toward stablecoins, which already make cross-border commerce faster and cheaper on dollar-denominated rails. Longer term, Bitcoin could be even more disruptive, but that vision will take time. For companies like Payoneer, supporting stablecoin flows today while keeping an eye on Bitcoin’s trajectory is key to staying competitive. I think the few points I raised above point to a sector that could increasingly have to adapt to not just digital payments but also non-traditional currency, such as stablecoin or Bitcoin, so from an investor perspective, I think it could drive upside for those fintech brands who have already gotten ahead of that trend. For instance, fintech giant PayPal seems to have jumped on this new reality. Back in April, CNBC reported that "PayPal launched PYUSD in 2023, making it the first major financial institution to launch a U.S. dollar-backed stablecoin," adding that they are also trying to entice customers as "customers will earn an annual rewards rate of 3.7% beginning this summer. It will be paid in the PayPal USD stablecoin (PYUSD-USD) on their holdings of the same token." Well, I went and tested it out, symbolically buying my first $1 in PayPal stablecoin, and sure enough, they do send those rewards regularly, and while this article is not meant to promote that as a payment method, it is a sign that the big players in this space are increasingly offering additional options and payment methods. The good news, for now at least, is that Payoneer is also looking to jump on this stablecoin bandwagon, and the fact that they are at least exploring it should add some upside potential to this stock. For instance, industry site Payments Dive reported last June that Payoneer CFO Bea Ordonez had some remarks on this topic: The company sees stablecoins as 'complementary' to its core business at the moment, Ordonez said, with some interest from its customers, but there are still some challenges left to solve in the space, particularly regarding the infrastructure necessary to utilize such assets as a payment rail at scale. In addition to payment trends, the fintech space could see upside from the increased role of artificial intelligence/AI. In its Top Fintech Trends For H2 2025, global consultancy KPMG said the following: There is expected to be significant growth in interest as it relates to the development and use of AI agents — particularly in areas like financial crime and fraud, operational processing, frontline enablement and regtech. Notable on that front is that Payoneer has already recognized that macro trend and is part of it, saying on its official company website: Payoneer is already using AI across a range of functions, including forecasting and modelling to identify new business areas for development. We also use AI to combat fraud, making every transaction more secure for our users, while at the same time improving our customer service to enhance the user experience. So, I think there is cause to be bullish on this sector as it seems to be one with the times and not just adapting but also leading the way towards how many people globally could be paying for goods and services in the future. Revenue Growth: Impressive Q2 Results Along With Positive Guidance For 2025 Now that we have some sense of trends in this sector, let's talk about what company-specific factors could impact top-line growth at Payoneer. After Q2 results announced in early August showed strong momentum and a +16% YoY revenue growth, the company had a positive forward view, saying, "with a strong market position, differentiated assets, and a clear focus, we are confident in our strategy and are reinstating our 2025 guidance." That should add some upside confidence to investors concerned about where the firm may be going. In addition, investors could see continued support of the share price, with the firm saying in Q2 commentary (pg 2) that "we’re confident in our long-term opportunity and are announcing an increase to our share repurchase authorization to $300 million." Besides potential for future revenue growth, I am also looking for a proven model of past revenue growth and, preferably, a diversification across global regions since this company is in the same sector as major peers like PayPal, which has long been global. We can see from Payoneer's Q2 presentation (p. 13) , that that is just the case with this company, a proven 3 year revenue CAGR across multiple regions of the world, but particularly notable has been Latin America (+31% CAGR). PAYO - rev growth by region (company presentation) Further, in this peer comparison below, Payoneer has an expected forward revenue growth of +10.5%, the best in this group, even beating PayPal: PAYO - rev growth v peers (Seeking Alpha) On a more granular level, a segment where Payoneer has proven itself as a strong revenue grower has been B2B (business to business), as we see in the table from the investor presentation (p. 24) , with the company boasting of +37% YoY growth in the B2B segment, or businesses paying each other: PAYO - b2b growth (investor presentation) I believe the multiple factors above are complementary to the macro factors discussed earlier, and the trend towards digital payments, so for these reasons I am bullish when it comes to revenue growth potential as well. Profit margins: Key Peers Beat On Margins, As OpEx Points To Rising Business Expenses Looking past top-line revenue, let's consider the topic of profit margins, especially since earnings numbers can influence investor decisions so much. This is where the rosy revenue story in the prior section becomes slightly less rosy. For instance, using a metric like the EBITDA margin to get a sense of the core business without use of depreciation, it is at only +15% yet the sector avg. is nearly +22%. Further, the net income margin is a mere +9.8%, while the sector avg is above +23%. On a more granular level, comparable data shows several peers are beating Payoneer on profit margins, causing some downside risk to this stock I think: PAYO - margins vs peers (Seeking Alpha) In addition, although the company has proven it can be profitable, its adjusted EBITDA margin has generally been on a downward trend, as the i nvestor presentation (p 23) shows: PAYO - adj ebitda margin trend (investor presentation) Although the company did not mention any specific drivers impacting this margin trend, what we can see from the income statement data on Seeking Alpha is that operating expenses (other, total) have been continually climbing from Dec. 2019 through the year ending Dec. 2024, pointing to a trend of a business that is increasingly costly to run: PAYO - opex trend (Seeking Alpha) For the reasons covered above, I am inclined to be in the neutral/hold range when it comes to this category, as I think margins can certainly impact earnings growth in comparison to similar peers. Cash Flow Trends: A Proven Cash Flow Grower, Reinvesting In Shares Rather Than Dividends We've talked about profits and margins, but another fundamental business metric is cash flow, so here we touch on some cashflow trends. For one thing, unlike many of the stocks I cover, this is not a dividend payer so that is one less cash obligation that the firm has to dish out, but also is not a great stock for those building a dividend income portfolio. So, if you are still reading, I assume you care about this stock for potential capital gains and not dividends, so along those lines I mentioned earlier that stock repurchases by the company can help support the share price. In fact, the company reported in Q2 commentary (pg 2) that they "accelerated share repurchases to $33 million at a weighted average price of $6.80, nearly double the amount repurchased in the prior quarter." An indicator of the cash flow from core business operations, the operating cash flow , has shown signs of growth so far, with data showing +22% YoY growth vs the sector avg at just +12%. I think this shows signs that Payoneer is a proven cash flow grower, which could help support further share repurchases and reinvestment in the company and growth via its innovation pipeline, rather than dividend payments. In fact, the company investor presentation (p 18) shows this trend nicely over the last few years: PAYO - operating cashflow growth (investor presentation) So, while the firm loses some points for not being a dividend payer, it is only fair to acknowledge the positive cash flow trends, commitment to share repurchases, and reinvestment in its business. For these reasons, I am in the low buy range when it comes to the category of cashflow trends. Balance Sheet: No Long Term Debt Adds Strength To the Risk Profile We have talked a lot about elements of the income and cash flow statements, but another fundamental area is the balance sheet and some risk elements to consider. On a positive note, when comparing debt-to-equity vs similar peers I selected in this sector, Payoneer has a D/E of just 0.05, the lowest in this peer group, and painting a picture of a low debt risk in relation to equity: Data by YCharts While that adds some strength to the upside story, as the firm heads towards 2026 in a much better debt position that some companies in this sector. We can see how this looks in its balance sheet , which has not had any long-term debt for a while: PAYO - LT Debt (Seeking Alpha) I did not find any major credit rating agencies covering this stock recently, so that would have been a nice added perspective to mention. I think it is worth being highly bullish in this category as it is a company with no long-term debt yet has a proven positive cash flow growth, so this means less cash will be spent on paying back debt and more can go towards future share buybacks and reinvestment into the company, or future acquisitions that drive company growth. Some readers may take an opposing view, however, saying that lack of corporate debt may be missing opportunities to finance growth. However, I think that makes more sense in environments with much lower interest rates than we've seen in the last few years, thereby waiting for cost of capital to come down. Valuation: A Case of High Fwd P/E and Cheap Share Price At the Same Time Let's take a moment to consider a valuation metric that is relevant to forward-looking investors. The fwd P/E (GAAP-based) is 25.69, which is around 82% higher than the sector average. The non-GAAP P/E is not too much different. At the same time, the fwd P/B is at 2.70, vs the sector average of 1.70. At first glance, this points to significant overvaluation on this stock, which could indicate a highly optimistic market view on Payoneer's future earnings. Interestingly, however, despite those metrics showing overvaluation, the price chart I pulled below shows the stock trading significantly below its 200-day SMA for a while now: Data by YCharts In addition, consensus estimates call for a -24% YoY EPS decline this year, but followed by a recovery in FY26 of +17.6%, and further growth of +23% in FY27. Because the fwd P/E can rise significantly if the earnings estimate falls (which causes a lower denominator in that ratio) then it seems that could be the case here, with the consensus having a negative EPS growth projection for this year. If one were to take the long-term view, though, this is an opportunity to buy a stock trading well below its average, which will see significant EPS growth in FY26 and FY27, if those forecasts come true. Because of declining EBITDA margins, and profit margins trailing some key peers, which I showed earlier, I am leaning in the neutral camp in this case. Future Price Target: A Future +31% Upside Expected Further To determine a future price target, and potential upside to the share price, I created the following table: PAYO - price targets (author) In this worksheet above, I determined my future price target is $6.17 (fwd P/E x consensus EPS estimate) which I then averaged with the Wall St consensus target of $9.81, to get an avg. price target of $7.99. This forecasts an upside of +31% vs Wednesday afternoon's share price. If you are curious why I use both my own and the Wall St consensus price targets, it is to present a more fair and balanced picture of price targets. Nevertheless, a forecast calling for 31% upside is certainly worth adding points to the bullish column. Because forecasts do not always come true, though, I want to reiterate that this is only one component of my holistic approach to rating this stock. Challenge To My Rating: Global Recessions Impacting Spending A potential challenge to my bullish call, not mentioned so far, could be something that could impact the volume of payments flowing through payment processors like Payoneer, a business that depends on high volumes of payments, and I think that could be a global recession that impacts both business and consumer spending volume in general. Because forecasts can vary, and could be ever-changing, I would point to some of the most recent forecasts from established sources. The last trading day of September proved to be quite a bullish one, and on the heels of that Reuters published some US recession probabilities from major financial institutions, indicating at most a 40% chance: US recession forecasts (Reuters) It is also worth considering what Deutsche Bank (DB) said a few days ago in a paper, suggesting that "2025 will not be a year of rapid GDP growth: U.S. growth is forecast at a modest 2.0%, with the Eurozone lagging some way behind (0.9%) and Chinese growth (4.2%) well below recent historical averages." So, what could mitigate recession risk for Payoneer is that it is indeed a global business, and as we see above, not every region might experience the same economic growth or slowdown. Conclusion: An Innovate, Future-Driven Business Fall is all about learning new things but also about change, and in the wake of learning much lately about AI and fintech, from the point of view of a future-minded analyst, it seems Payoneer is one of those stocks that is worth considering for a portfolio, in particular as the role of stablecoin and bitcoin becomes increasingly commonplace globally, on top of the existing momentum in standard digital payments tied to traditional currencies. As a business, it has proven it can grow cash flow, grow its top line in several global regions, and continue innovating with its recent partnership with Stripe. In conclusion, the case is strong to go long on Payoneer.
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