The valuation of PayPal (NASDAQ:PYPL) has become attractive, and Wall Street analysts have gotten much more upbeat on the name. Therefore, I recommend long-term investors buy PYPL stock following its huge retreat.
According to Yahoo Finance, the forward price-to-earnings ratio of PYPL stock is just 26.3x. That’s a very low valuation for a company whose revenue is expected by analysts to jump from $29.4 billion this year to $35.2 billion in 2023.
What’s more, multiple reputable Wall Street firms are becoming more bullish on PYPL stock. Wells Fargo recently resumed coverage of the shares with an “overweight” rating. The firm contends that the company’s multiple new projects are likely to “support ongoing improvement in the company’s financial performance in [2022 and 2023].” Among these projects are its efforts to increase its share of online checkout sales and encourage brick-and-mortar stores to use its products more frequently.
On March 30, Goldman Sachs started coverage of PayPal’s shares with a “buy” rating. The firm expects the company’s earnings per share (EPS) to surge more than 20% in 2022 as its new products and “the digitization of payments” combine to lift its bottom line.
Overseas growth and the expansion of e-commerce should also be positive for PayPal, Goldman Sachs believes. In 2023, the firm expects the company’s EPS to be $5.83. If that estimate is proven correct, the stock is trading at a forward price-to-earnings ratio of about 19x.
Also definitely worth noting is that research firm Valuates Reports recently predicted the value of the “global online payment gateway market” is expected to jump to $6.4 billion in 2027 versus $2.4 billion in 2020. That’s a large compound annual growth rate (CAGR) of nearly 15%.
“Evolving payment methods, rising e-commerce use, improved broadband connectivity, government initiatives that support digitizing payment [and] increased mobile usage” will all support the sector’s growth, according to Seeking Alpha. All of these factors make PYPL stock appealing today.
On the date of publication, Larry Ramer 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.
