With stock market chatter and headlines being dominated by only a handful of soaring tech stocks these days, it's refreshing to come across something new but equally promising. Paymentus Holdings, Inc. (NYSE: PAY) is a $2.5 billion fintech company based in North Carolina whose shares IPO'd in 2021. They possibly couldn't have picked a worse time, as the initial highs they saw quickly gave in to the brutal sell-off that came when tech popped.
But the stock has been undergoing something of a resurgence in the past year. Since bottoming out from an 80% slide just over a year ago, shares of Paymentus have tacked on an impressive 200%. Much of that gain came on March 5, 2024, when a 20% pop sent the stock to new highs, and there's plenty of reason to think this rally is just getting started.
Strong Earnings and Guidance
The catalyst for yesterday's jump was Paymentus's fourth quarter earnings report, which blew analyst expectations out of the water. A non-GAAP EPS print of $0.11 was 80% higher than the consensus, with revenue also coming in hot and showing year-on-year growth of 25%. These were both record numbers for the company, as it continues to build a track record of profitability.
However, the outperformance didn't just stop there, with the company's EBITDA jumping more than 95% year on year and management indicating there was more to come. The tech company, which sells bill payment software, is also looking for its Q1 revenue to land ahead of analyst expectations, suggesting 2024 could be one to remember for Paymentus and its investors.
Better-than-expected forward guidance like this can be one of the best things to see in an earnings report, even more so than the headline revenue and earnings figures from the previous quarter. This is because Wall Street is, for all its faults, forward-looking in its outlook and will always price a stock based on its expected performance rather than its past. So when a company like Paymentus says they're going to do a lot better than expected in the coming months, that means a fundamental re-pricing of the company's stock has to take place, the start of which we're already seeing.
Considering the Long Opportunity
The bullish outlook should come with a note of caution, however. Such has been the run in recent days that Paymentus's stock is starting to look a little frothy and overbought. A Relative Strength Index (RSI) reading of 77 confirms this, so don't be too surprised if there's a pull-back in the near term. While the stock managed to hold onto most of the gains in yesterday's session, it wasn't able to close at the highs, which would have pointed to further gains in the near term. But if anything, this could be a good thing in the longer term as it will allow Paymentus shares to consolidate and develop a new level of support.
For starters, look for the stock to tread water above the $19 mark. This was how high shares ran at the end of last year and is already right where they opened on a gap-up for yesterday's session. It's a key technical level that must be held through Friday to maintain confidence in the stock's ability to keep rallying into the rest of the month. But this should be easily achievable with Paymentus shares already trading up in Wednesday's pre-market session.
