Paysafe (NAS:PSFE) — mrkt cap $1.1B; Price $18.77; EV/EBITDA 7.9
STARTER POSITION INITIATED. Paysafe’s revenue is ~evenly divided between B2B payment processing and B2C digital wallets. Within the B2B segment, around 30-35% is attributed to online gambling and overall revenue is > 50% U.S. attribution—a rapidly expanding sector. The U.S. online gambling market is projected to double by 2029, fueled by increasing legalization, states seeking additional revenue, and technological advancements like in-game betting. (25 states have legalized some form of online gambling in the past five years, bringing the total to 30). Paysafe’s multi-decade experience in processing payments for online gaming has established a significant advantage in managing high-risk areas (KYC, AML, and compliance). We think the company is undervalued after ~30% recent post-earnings sell-off attributed to a slight EPS miss due to investments made in expanding sales personnel.
Palladyne AI (NAS:PDYN) — mrkt cap $226mm; Price $7.21; EV/EBITDA NA
PASS. Palladyne has surged nearly 300% in the past two weeks following excitement over its partnership with Red Cat, a drone manufacturer set to integrate Palladyne’s AI algorithms into its drones. Red Cat recently secured an order from the U.S. Army for approximately 6,000 drones and has also experienced notable price appreciation. At ~35x revenue, PDYN carries significant growth expectations, which we find challenging to underwrite. Historically focused on hardware, PDYN has only recently pivoted to software. Given its subscale nature, we would need to see substantially stronger execution in AI offerings before considering a position.
Taylor Devices (NAS:TAYD) — mrkt cap $143mm; Price $45.86; EV/EBITDA 10.4
MORE RESEARCH NEEDED. Taylor Devices designs and manufactures advanced shock absorption systems, with 59% of its revenue now coming from aerospace and defense (A&D) —a rapidly growing sector. Recent quarterly sales increased 17% yoy, with A&D revenue up 20% (construction declined slightly). Management has optimized operations, reducing cash conversion. Backlog remains strong at $28.4M, with 62% linked to multi-year A&D projects. The company’s legacy in high-margin A&D, coupled with operational improvements and a robust balance sheet ($25mm+ in cash, no debt), could position it for sustained growth. More work needs to be done on how the company will scale and trying to gain insight into the company – management is less communicative than most.