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The PayPal Holdings Inc (PYPL) Stock Growth Story Is Just Beginning

PYPL stock won't blow anyone away, but that doesn't mean it's fully valued yet

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After all, it’s delivering promising results. In the most recent quarter, the company’s total payment volume grew 25% year-over-year to $87 billion. And more people are using PayPal than ever. Active customer accounts increased 11% to 192 million globally. At the same time, users are going with PayPal more often. Average interactions per customer increased to 30 from 27 year-over-year.

That’s driving steady and above-average revenue growth. Analysts expect revenue to rise 17% this quarter, 16% next quarter and more than 16% in the next fiscal year. The S&P 500 sure doesn’t offer those sort of prospects. For all of 2017, analysts are projecting revenue growth of 5.9%, according to FactSet.

The reality of stiff competition and worries about PayPal’s ability to innovate are going to remain headwinds for PayPal stock, but it still looks poised for outperformance.

With an average price target of $46, the Street sees implied upside of 15% in the next year or so. That’s a buy in any analysts’ book. If financial deregulation does indeed come to pass, PYPL stock would be worth even more.

If nothing else, PayPal stock stakes a claim to offering growth at a reasonable price. It’s not going to blow anyone away with its top-line performance, but that’s fine. PYPL stock is not priced for that anyway. On the other hand, it’s not properly priced for the market-beating growth it does have.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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