Top digital payments company PayPal (NASDAQ:PYPL) has had a rough few months. Despite the rise in digital payments and a strong move towards digitization, PYPL stock isn’t impressing investors.
The disappointing guidance has left investors frustrated, which resulted in a huge dip in PayPal stock. Despite the new opportunities and more customers utilizing the platform, PYPL stock has seen a constant dip.
The stock hit an all-time high of $310 in July and has consistently moved downward. It dropped 21% over the past year and is down 40% in the past six months. PayPal went from $302 in July to its current price of around $180. This is a huge buying opportunity that smart investors shouldn’t miss.
Here are a few reasons why I think PYPL stock is a good addition to your portfolio.
Stablecoin Could Be Interesting
The digital payments giant allows users to send and receive money, shop and invest in cryptocurrencies. The earnings of the company did not go well due to the pandemic and this had an impact on the valuation. But investors have recognized the potential of the company and understand that the future is digital.
Consumers are shopping online, which has led to a surge in the demand for digital payments. I believe PayPal offers products that will continue to remain in demand. The future looks bright and the management has offered ambitious projections for the company.
The company has expanded its offerings to cryptocurrency trading which is making a lot of news recently. It recently confirmed that it is exploring the creation of its own stablecoin, which would be known as PayPal Coin. It would be a cryptocurrency that is pegged to the reserve asset and could be less volatile than the other cryptocurrencies.
This is a huge move by the company and it will be interesting to see how it works.
Rise in Volume and Transactions
The best way to judge PayPal’s business is to understand what lies at its core. It is a payment business and the total volume and transactions have an impact on its profitability. Whenever a user receives a payment, PayPal will charge a fee and it will add to the revenue. Hence, with a rise in total payment volume, the company will generate higher revenue.
For the third quarter, total payment volume was $310 billion, which is a 26% increase from the previous year. The company also saw a rise in the active accounts to 416 million, which means more users are using the platform. Management has set a growth target of 18% for 2022 and expects to end the year with 430 million accounts.
Fourth-quarter numbers will be important for the company and if it manages to report strong revenue and user numbers, PYPL stock will start to rise.
The Bottom Line on PYPL Stock
One must not ignore the huge opportunity that comes with PayPal. As the company expands its offerings with new product launches, it is only going to gain in value. The business is sitting at a discount and PYPL stock could rebound after the fourth-quarter results.
PayPal is working towards launching new products and catering to the needs of the users in every possible way. It has also shown tremendous growth through the buy now, pay later service that became a huge hit during the holiday season. The numbers will impact the bottom line and I am certain the company will have an impressive revenue and cash flow report for the fourth quarter.
Do not judge the stock based on the current decline or the new Covid-19 variant. Consider the potential of the company in the long term. PYPL stock has massive potential to grow throughout 2022. The current dip in the stock is a good opportunity to enter.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.