PAYONEER GLOBAL INC. 
By 
Payoneer Global's services are used by more than 5M+ enterprises, marketplaces, and SMBs in over 190 countries in 11 currencies, giving the company a significant competitive advantage through the network effect. This ubiquity confers an important competitive advantage - the famous "network effect": the platform that hosts the most users naturally becomes the reference.
The company controls a significant flow of data related to its customers' international transactions and acts as a central aggregator in an ecosystem of diverse participants. This includes companies using different international spend management solutions, international payment networks, e-commerce platforms, and marketplaces. This unique position allows Payoneer to offer more efficient and responsive payment solutions to its SMB customers, differentiating it from its competitors.
Several trends that could fundamentally alter competitive dynamics are currently centered on the global cross-border payment landscape, including: increasing pressure from cutting-edge technologies like distributed ledger technology (DLT) and card and network innovations; accelerating global trade in the retail and corporate sectors; shifting regulatory and sanctions frameworks; and shifting consumer demands.
Businesses are finding it difficult to keep up with the new demands brought on by the proliferation of smartphones and the popularity of digital access points for remittances like alternative payment methods (APMs). Alternative solution providers that offer cross-border payment solutions that are quicker, less expensive, and more transparent can outperform banks in the market.
In 2022, 13.9% of revenues were generated in the United States (+56.3% compared to 2021), 31.2% in China (+21.85%), and 54.9% in Europe, Latin America, and other Asian countries (+34.12%). And, 100% of the revenue comes from the Cross-borders Payments Platform. This activity is growing strongly as shown by an increase of 32.58% between 2021 and 2022.
Payoneer Global is distinguished by its business model based on providing international payment services for businesses and self-employed individuals. Their competitive advantage lies in their ability to aggregate the different players in their ecosystem and use their customers' international transaction data to offer more efficient payment solutions tailored to the needs of their SMB customers. The company does not manage prepaid expenses for businesses but rather international money transfers. Their business model is based on transaction fees for money transfers, rather than managing business expenses.
Having abundant liquidity could be a competitive advantage for Payoneer, as it would allow them to invest in growth and development opportunities without the need to raise new capital. This would allow it to finance acquisitions, launch new products and services or invest in research and development without diluting its shareholders' ownership or increasing its debt.
At the moment, the North American region dominates the market for international cross-border payments. The North American market is primarily driven by the presence of top commercial banks, a strong technology infrastructure, strict laws, favorable opportunities for cross-border payment solution providers, rapidly expanding cross-border e-commerce sales, and supply chain diversification. Asia-Pacific is currently the region in the world with the fastest-growing cross-border payments market.
It has established a firm foothold in various countries across the Asia-Pacific region, such as Japan and Korea. The company has forged strategic partnerships with major e-commerce players such as Rakuten and EC21 in these regions. In India, Payoneer re-entered the market in 2016 and customized its offerings to comply with local regulations where it became the first digital payment platform to provide customers with a Foreign Inward Remittance Certificate (FIRC) digitally, thereby simplifying the necessary business processes.
Risks:
- A highly competitive market: The payments space is very competitive and Payoneer must compete with the payment processing units of major banks as well as well-funded fintech.
- Economy under stress: A slowdown in the economy and activity is likely in the coming months.
- The risk of hacking: Because of its operations, the company manages secret and private data about its customers and their employees. A security breach in the company could seriously damage its reputation.
- Regulation: Payments themselves are a highly regulated market, and legislators could impose limits on Payoneer's business activities.
The valuation of the group at this stage is a complex task, given the volatility of the market and the uncertainties surrounding the tech industry. Being a small cap in this very competitive industry is also hard for valuation, especially since the company did its IPO in 2020 during the pandemic where the global economy wasn’t optimal. It is difficult to determine the "right price" for the business as it was trading at -182 times earnings in 2022- and 40-times earnings in 2023 and 28-times earnings in 2024. This makes it challenging to assess whether the company is "expensive" or "affordable."
Nonetheless, the company's stock is attractive, with steadily increasing revenues that have risen by 32.77% in the previous year. Analysts are optimistic about the coming years, with sales expected to reach $1090 million in 2025 (CAGR of 18,1%) from the $473 million recorded in 2022. Moreover, its EBITDA has increased by 72% between 2021 and 2022, reaching $48,5 million, and is expected to reach $179 million by 2025.
The net margin has improved significantly, increasing from -7,18% in 2021 to -1,91% in 2022 and is expected to reach 8,52% in 2025. This positive trend reflects the group's excellent management in increasing sales while boosting margins. Additionally, its EPS is projected to increase from $0,14 in 2023 to $0,25 in 2025.
Recently the company released its Q1 2023 numbers (05/09/2023). The company announced revenues of $192 million (+40% YoY), EBITDA of $38.8 million (20% margin and +12% YoY) and Net Income down 61% YoY to $7.9 million.
Overall, Payoneer Global is a promising company in the constantly evolving cross-border payments industry. Despite its growth and market position, there are still risks and uncertainties in its future, such as the lack of visibility and volatile P/E ratio. The business needs to strengthen on the fundamentals and attract more new customers in the coming months/years but remains an action to keep an eye on.
