PayPal (NASDAQ:PYPL), a fintech veteran under eBay’s wing for years, became an independent entity in 2015. In the evolving fintech landscape, with newcomers in neobanks, and payment processing, PayPal faces growing competition.
The company leveraged the e-commerce boom with a notable uptick in branded checkout volume. It grew this metric 8% in July from 6.5% in June, marking a monthly peak. Further, the company’s direct-to-consumer relationship sets it apart. Also, top-notch authorization rates are a quantifiable advantage, crucial in payment processing for transaction volume and revenue.
So, while some investors and analysts can be skeptical of PayPal’s valuation, remember the company has a sturdy track record of growth and innovation. Add PayPal to your portfolio and hold it forever.
Optimistic Q3 Earnings Report
First, PayPal is expected to report Q3 2023 earnings soon, with the market keen to see if the actual results align with expectations, impacting the stock price.
And, looking ahead to Paypal’s Q3 earnings, Deutsche Bank (NYSE:DB) analyst Bryan Keane is optimistic about the company’s performance. In fact, he expects it to exceed consensus expectations for Total Payment Volume (TPV) and revenue by 1-2 percentage points. However, the focus is not just on the numbers. New CEO Alex Chriss’ first earnings call is crucial for insights into addressing business challenges and implementing a turnaround.
Specifically, Keane believes the new CEO should lower margin expansion and earnings expectations for FY24 to make essential investments for business improvement. And, while he maintains a buy rating on PayPal, he also reduced his price target from $80 to $74, citing uncertainties. Still, this price target implies 38% upside potential.
While the earnings call will impact price and future expectations, it’s valuable to assess the likelihood of a positive earnings-per-share surprise. PYPL seems like a strong candidate for such a surprise. But, other factors should be considered when making investment decisions around its earnings release.
PayPal Continues to Seal Deals
For instance, the company has named GroupM as its global media agency of record following a year-long review. The choice was influenced by GroupM’s data-driven performance marketing approach. In addition, PayPal plans to evolve from an online payments leader to a more diverse and customer-empowering global economy player.
Althought specific spending figures weren’t disclosed, in 2022 PayPal spent $112.2 million on measured media in the U.S.
Additionally, United Parcel Service acquired Happy Returns, a software and reverse logistics firm specializing in retailer returns, from PayPal. Specifically, the acquisition was projected to finalize in the fourth quarter. UPS CEO Carol Tomé highlighted the integration of Happy Returns’ digital expertise with UPS’ network and locations for widespread, label-free returns in the U.S.
Buy the Dip Now
Finally, PayPal’s stock hit a 52-week low, and the fear of competition is causing investors to exit. Still, a new CEO and plans to enhance user loyalty could breathe life into the company. While PayPal must prove itself, it remains a “show me” story to many investors. Low expectations present a buying opportunity for value investors, considering PYPL is a strong business trading at an attractive valuation right now.
On the date of publication, Chris MacDonald 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.