PayPal Stock Is a Screaming Buy At Current Levels

  • Down more than 70% from its 52-week high, PayPal (PYPL) stock looks attractively priced at current levels.
  • While the transition from eBay will hurt PayPal’s revenues in the short-term, over the long-term the move will prove immaterial.
  • PayPal remains the world’s leading fintech and online payment company with a 50% market share.
PYPL stock - PayPal Stock Is a Screaming Buy At Current Levels

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Down more than 70% from its 52-week high, PayPal (NASDAQ:PYPL) stock is too cheap to ignore.

Shares of the online payment giant have been knocked down 55% since the start of the year. The stock now sits more than 70% below its 52-week high of $310.16. While some investors might be tempted to remain on the sidelines and watch for signals that PYPL stock has formed a bottom, they shouldn’t wait too long. With its valuation at historic lows and its share price below $100, investors should strike while the iron is hot. Who knows when PayPal stock will again be this affordable?

Ticker Company Current Price
PYPL PayPal Holdings, Inc. $86.87

Long-Term Prospects

PYPL stock has been pulled down in recent months by the general downturn in technology stocks, with shares of financial technology (fintech) and online payment companies particularly hard hit. But the drop in its share price does not reflect the fact that PayPal continues to grow strongly and that the company’s long-term prospects remain extremely encouraging. Management has guided that its total payment volume this year will double, revenues will grow by 1.5 times, and its number of active accounts will increase 40% and surpass pre-pandemic 2019 levels. The company also has nearly $5 billion in cash on hand and a debt-equity ratio of 50%, giving it a very healthy balance sheet.

Additionally, PayPal retains a 50% share of the global payment processing software industry, and its Venmo mobile payment app remains the industry’s gold standard, especially popular with small businesses and entrepreneurs. While the company does face growing competition from the likes of Amazon (NASDAQ:AMZN) and Shopify (NYSE:SHOP

), those companies are not solely focused on online payments the way PayPal is and are unlikely to take serious market share from the company. PayPal also runs an innovation lab that is focused on helping the company continue to adapt, innovate, and grow its offerings to consumers and businesses.

eBay Transition

Wall Street’s confidence in PayPal was shaken after the company lowered its forward guidance at the start of this year, a result of persistently high inflation and deteriorating economic conditions. Analysts have also been hesitant to embrace PYPL stock while the company completes its transition away from e-commerce company eBay (NASDAQ:EBAY). eBay is transitioning to its own payment platform this year and the switch is expected to lower PayPal’s 2022 revenues by about $600 million. While not insignificant, PayPal shows every indication of being able to recover from the move away from eBay quickly and efficiently.

The company is forecasting sales this year of $28.6 billion, which would represent 13% year-over-year growth. Also, PayPal’s non-eBay revenue growth remains sturdy at 20%, showing that the company is positioned for continued expansion even without revenue coming in from eBay’s online platform. In the grand scheme of things, the separation from eBay should prove to be immaterial to PayPal. Lastly, investors should really zero in on just how cheap PYPL stock is currently. The company’s shares are now trading at 28x earnings, which is a 50% discount to its historic average price-to-earnings (P/E) multiple of 57.

Ride PYPL Stock To Future Gains

While PayPal’s stock is not without risks, the same could be said for all technology and fintech stocks in the current market. But long-term, PayPal shows every indication that it will continue to dominate the online payment sector and its finances are healthy and robust. Best of all for investors, the stock is trading at a huge discount and historically low valuation right now. This presents an opportunity to take a position in PayPal near rock bottom prices and then ride the shares to future gains. While the present environment is uncertain and volatile, the future remains bright for the fintech giant. For this reason, PYPL stock is a buy.

On the date of publication, Joel Baglole 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.

 


Article printed from InvestorPlace Media, https://investorplace.com/2022/06/pypl-stock-is-a-screaming-buy-at-current-levels/.

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