Only few stocks in any industry have proven to be as resilient as the payments giant, Paypal. As the largest digital platform offering money transfer services, it’s one of today’s high-profile stocks. Yet, you might be wondering like many others if the stock is not a sinkhole in the current stock market rally.
Outlook for Paypal in the Payments Space
New and tenured investors have had to endure a rocky start to 2022. According to the Motley Fool, Paypal stock has fallen 62 per cent since mid-2021. Like CrowdStrike and Pubmatic, the company has an impressive growth opportunity in the mould of digital payments.
Granted, the digital payments space is jam-packed, but Paypal managed to rack up $1.25 trillion in TPV or Total Payment Volume in 2021. This figure is expected to rise $1.5 trillion in 2022.
The best part of Paypal’s business is the growing number of payments from existing users. There were less than 41 transactions per active account. This figure shot past 45 per active account in 2021, that is, more than 19 billion transactions spanning 426 million active users.
A Small History of Paypal Stock
Analysing the fundamentals for Paypal stock shows a strong track record of earnings and sales growth, that has outlasted the last decade.
In 2010, Paypal earned a paltry 29 cents per share. By 2019, EPS had grown more than tenfold. In 2020, the firm’s earnings leapt to $3.88 a share – a whopping 31 per cent. The year after the pandemic was nearly half as good as the previous one, as execs reported $4.60 as EPS. Analysts believe the company would grow 1 per cent in 2022 and top 25 per cent in 2023.
Deal or No Deal?
Paypal’s endless stream of cash enables the company to launch product after product, and many services to their teeming customers. The payments pioneer has let users buy, hold, and sell cryptocurrencies. It’s still tinkering with the idea of a stock trading platform for US users.
Jack Dorsey’s Block came to the crypto fight prepared, yet Paypal is also offering shopper discounts, instalment payments and cryptocurrency buying. While starting life as a person-to-person money transfer service for family and friends, Venmo (like Cash App) has morphed into a range of financial services apps powering Paypal’s relentless march in digital payments.
Acquiring Paidy, the “buy now, pay later” financing company for $2.7 billion in September 2020, is a strong signal that Paypal is eager to use its unlimited cash to play the acquisitions game smart.
It had been in talks to buy Pinterest for $70 a share, but chose to discontinue the acquisition.
Paypal is barely over 20x Wall Street’s forward-year earnings forecast – the cheapest ever since it became a public company.
Strong fundamentals position Paypal’s EPS with a rating of 84 out of a maximum 99. The EPS Rating means Paypal looks set to grow profits year-on-year, using the most recent two quarters and the previous three to five years of earnings growth.
Despite Q4 2021 earnings and total payment volume falling short of expectations, Paypal stock looks set for long-term growth after a 24.6 per cent nose-dive on February 2.
Forty-three analysts providing 12-month price forecasts for Paypal Holdings Inc. offered a median target of 1$75.00. The highest estimate stood at $245.00, while the lowest estimate was $110.00. This median estimate is a +57.36 per cent rise from the last price of $111.21.
Earnings per share is $0.88 and a poll of 50 investment analysts puts the current consensus in the strong “Buy” zone. This has been steady rating since the beginning of Q2 2022 as EPS annual growth is 0.95 per cent against a quarterly growth dip of 21.08 per cent. So, is Paypal a deal? We think so.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only