From a new chief executive to a dollar-backed stablecoin and deployment of artificial intelligence technology, there’s been a lot of intriguing news happening with PayPal (NASDAQ:PYPL) stock lately.
Yet, short-term traders continue to keep PYPL stock in the penalty box. This seems completely irrational, but then, it’s also an opportunity for enterprising investors.
PayPal is much more than a basic point-of-sale payments platform nowadays. The company is flourishing in 2023, and PayPal’s financials show PayPal is on the right track.
Therefore, I expect the stock market’s weighing machine to adjust PayPal’s market capitalization much higher in the coming quarters.
Don’t Fear PayPal’s Changes
There are multiple recent news items for prospective PayPal investors to consider now. First of all, PayPal’s new chief executive, Alex Chriss, is set to replace current PayPal CEO Dan Schulman on Sept. 27. Schulman has been the company’s chief executive for a long time – nine years, in fact.
I suspect that this C-suite transition is one reason nervous short-term traders hastily sold PYPL stock. The market typically prefers stability over the unknown, but investors really ought to give Chriss a chance.
What else is changing at PayPal? The company’s credit and debit cards finally support Apple’s (NASDAQ:AAPL) Apple Pay service. This is certainly a welcome change for many of PayPal’s customers and shareholders.
The buzz is getting louder concerning PayPal’s new stablecoin, known as PayPal USD. It’s a cryptocurrency token that’s “fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, and can be redeemed 1:1 for U.S. dollars.” In time, we’ll know whether PayPal USD gains traction among crypto users.
PYPL Stock’s Valuation Makes No Sense
Along with everything else I’ve mentioned about PayPal, prospective investors should also think about PayPal’s artificial intelligence connection.
Specifically, PayPal Chief Product Officer John Kim announced in late August that the company plans to launch “three new products with ties to AI in the next 120 days.”
Kim explained PayPal is rolling out a “checkout feature. . . that uses AI to keep track of all the permutations of your addresses and personal information that you might use.”
This will be a crucial security and anti-fraud feature which, I suspect, other payments platforms might copy soon.
By now, you see why PYPL stock deserves a higher re-rating on Wall Street. Frankly, I’m baffled that PayPal has a trailing 12-month price-to-earnings ratio of 17.68x, compared to 38.92x for Mastercard (NYSE:MA) and 31.34x for Visa (NYSE:V).
PayPal demonstrated its financial growth in 2023’s second quarter. The company’s net revenue increased 7% year over year, and its GAAP operating income grew 48%.
In addition, PayPal reported GAAP EPS of 92 cents, which is much better than the 29-cent earnings loss of the year-earlier quarter.
PYPL Stock Is a Bargain Anywhere Near $60
If PayPal shares are anywhere near $60 when you’re reading this, consider it a gift from the irrational market. If the stock is in the $50’s, that’s an even better opportunity.
It’s not every day that you’ll see a mismatch between a company’s real value and its share price, like you’re seeing with PayPal now. So, take advantage of a major mis-pricing which probably won’t last much longer, and consider buying PYPL stock.
On the date of publication, David Moadel 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.
