Last week, PayPal (NASDAQ:PYPL) CEO Dan Schulman took the stage at the 2022 Consensus festival in Austin, Texas. The event was an opportunity to appear in front of crypto followers and reaffirm his belief in cryptocurrencies. If you haven’t bought PYPL stock but are thinking about it, Schulman’s comments ought to give you a push.
Ten years from now, investors will look back on this period of instability and reflect on the courageous ones who hung tight even when Bitcoin (BTC-USD) fell below $24,000, well off its November 2021 all-time-high around $69,000. If you want to make a small bet on crypto but don’t want direct exposure, PayPal is one way to hedge your bet.
PYPL stock was trading for more than $300 a share less than a year ago, and shares haven’t been this low in four years. If PYPL stock hasn’t bottomed yet, it’s getting close.
PYPL Stock Underperforms Bitcoin
I happened to read an article by Finbold last week that said you could have saved your portfolio 160% by investing in Bitcoin a year ago instead of PayPal. So, for all the hand-wringing about Bitcoin’s terrible performance, it still managed to lose less over the past year than a similar investment in PayPal, a company with almost $26 billion in trailing 12-month revenue and $3.6 billion in net income.
Like a lot of growth stocks, PayPal has been battered and bruised in 2022. The company said its customer base is more affected by rising inflation because their spending is skewed toward discretionary spending versus non-discretionary spending.
Management lowered its 2022 guidance and now expects revenue growth of 12% and $3.87 in adjusted earnings per share, at the midpoint of its guidance, and to add approximately 10 million net new active accounts this year. In other words, PayPal’s business remains in growth mode, albeit slower than in the past.
More From Less
Up until February, PayPal was hellbent on getting to 750 million active accounts by 2025. It now plans to focus on getting more from its 429 million current active accounts.
One way PayPal will get more from less is by moving further into cryptocurrencies. Recently, the company announced it would allow accounts holding cryptocurrencies to transfer crypto to external wallets and exchanges.
“I don’t know if it’s going to be about the absolute number of users, or it’s going to be more about folks continuing to move in the adoption cycle,” Jose Fernandez da Ponte, PayPal’s senior vice president of blockchain, crypto and digital currencies, said about the change in policy. “We have a ton of people now who have adopted the basic product, and as they grow, they want to do more things. So, it’s less about bringing sophisticated users from the outside, it’s more continuing the learning curve for our base.”
Like a lot of businesses, PayPal is working through some issues. In the long term, crypto will be a big part of its growth. Schulman made that clear in Austin last week.
The Bottom Line on PYPL Stock
In an economic environment like the one we’re in today, I don’t think you can ever call a bottom. That’s especially true if PayPal’s historical valuation multiple shrinks from 50x earnings prior to the pandemic. If the company can get back to annual revenue growth of 20%, though, I have no doubt that, two to three years from now, $75 will look like a very good entry price.
Several analysts cut PayPal’s rating following the release of its first-quarter results in April. However, of the 49 analysts covering PYPL stock, 33 rate it a “buy” and only one analyst thinks it’s a “sell.” The average target price is around $116 and 58% above the current price.
PayPal remains an excellent long-term buy. However, I would probably only purchase a half position at this point. It can’t hurt to wait and see where the markets and economy are heading in the second half of the year before committing to a full one.
On the date of publication, Will Ashworth 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.