PYPL - PayPal: Priced For Failure Poised For Success

2024-06-27 02:30:53 ET

Summary

• PayPal Holdings remains a leading global fintech player and continues to benefit from the strong secular tailwinds behind its industry.
• While the stock price remains stagnant, PayPal's operational performance tells a very different story. The company continues to exhibit solid growth across its diverse range of payment businesses.
• PayPal is heavily undervalued with a 9.5x trailing P/FCF ratio, strong balance sheet, and forecasts for continued growth.
• Under new management, the company is prioritizing newer growth initiatives such as unbranded checkout and digital advertising.
• Though PayPal has been undervalued for a while, accelerating share buybacks should help force the issue, resulting in faster per-share earnings growth and squeezing the stock price higher.

PayPal Holdings, Inc. ( PYPL ) has been gaining investor attention throughout the first half of 2024, driven by its beaten-down valuation, fresh growth strategies, and several high-profile bets made by famed money managers. While longtime shareholders largely view the stock with disgust following its 80% decline over a 3-year period, others are taking the opportunity to jump in at these depressed levels. The hordes of optimistic PayPal shareholders include not only value investors enamored with the company’s strong growth and low valuation, but also technical traders and those betting on the powerful principle of reversion to the mean.

While PayPal’s stock price remains mired in a sideways trading pattern, the company’s operational performance is anything but stagnant. Revenues and profits continue to grow, the company’s service offerings are becoming increasingly diversified, and CEO Alex Chriss is making bold moves to supercharge the company’s innovation and competitiveness. Moreover, PayPal’s management team is devoting 100% of the company’s powerful free cash flows to share repurchases, supporting the thesis that the stock is extremely undervalued....

For further details see: