PayPal (NASDAQ:PYPL) presents a buy-the-dip chance, with a roughly 20% year-over-year decline in its stock creating a value opportunity. Goldman Sachs (NYSE:GS) recently included PYPL stock in its top S&P 500 growth stock picks, highlighting its growth within the 83rd industry percentile.
Despite recent user growth challenges, PayPal maintains robust profitability and vendor acceptance. Ongoing revenue and earnings growth, along with share buybacks, set it apart from trendier payment apps. After consolidation, PYPL stock appears to be a rare fintech bargain. With easing macro uncertainties in 2024, the company is positioned well to see its premium multiple restored. A solid balance sheet supports user acquisition efforts, aligning with optimistic upside potential.
Here are some more reasons why investors may want to consider PYPL stock within a well-diversified growth portfolio right now.
New Ventures
Prometeo’s platform facilitates seamless global corporate connections to Latin American financial systems, offering simple, automated access to information and payments across 10 countries, reducing friction and costs.
Ximena Aleman, Prometeo’s Co-Founder and Co-CEO, emphasized their vision of unifying Latin American markets through a single API. The Series A funding round success positions Prometeo to capitalize on this market opportunity and provide value to diverse stakeholders.
Antler Elevate, expressing commitment to game-changers, sees Prometeo’s single API as an innovation empowering businesses in Latin America. Fady Abdel-Nour, Partner at Antler Elevate, looks forward to building success with Prometeo.
Low Valuation
On January 13, PayPal’s stock had plummeted by 80% from its July 2021 peak, raising concerns. The current valuation, with a forward price-earnings ratio of 11-times, indicates a 50% discount compared to the S&P 500. While some may view this as a value trap, it’s crucial to assess what the low multiple actually provides.
PayPal, with over two decades in the digital payments forefront, boasts a competitively advantaged position. Its extensive scale, broad acceptance, and potent network effects, serving 35 million merchants and 393 million consumers, position it as a globally recognized, trusted, secure, and seamless money-movement solution. As commerce evolves across borders, PayPal stands well-positioned to capitalize.
The fintech company leverages a data advantage by serving both merchants and individuals, gathering valuable insights to combat fraud and enhance authorization rates. Despite undervaluation and pessimistic sentiment, its robust business and prospects make it a prudent portfolio addition.
Robust Financials
Unlike numerous emerging fintech ventures struggling with profitability, PayPal stands as a beacon of financial stability. Despite macro challenges affecting growth, PayPal remains highly profitable, reporting $1 billion in net income on $7.4 billion revenue in Q3, showcasing a 14% margin.
Crucially, PayPal generates significant free cash flow, projected at around $4.6 billion for 2023. After strategic reinvestments, the company prioritizes share buybacks, consistently reducing its share count over the past years. Additionally, as of September 30, PayPal holds $15.4 billion in cash and investments, well exceeding its $10.6 billion long-term debt, mitigating financial risks.
Buy PYPL Now If You Haven’t
Three pivotal elements drive PayPal’s payment volume. The branded checkout, widely accepted at 80% of top retailers in 2022, faces slowing growth. Meanwhile, Braintree, an unbranded checkout for merchants, surged with a 40% increase in total payment volume (TPV) in 2022, constituting 30% of PayPal’s overall TPV. However, its lower margins pressure overall profitability.
PayPal offers numerous appealing qualities, with its current valuation standing out as a compelling reason to consider investing in its shares today.
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.
