The fintech juggernaut PayPal (PYPL) has etched a global footprint with its accessible platform, servicing clients across 25 currencies and spanning 200 nations. Yet, a slowdown in growth has precipitated a 16.5% slump in its stock price from the recent year’s zenith. Still, the year-to-date uptick of a modest 6% pales in comparison to the broader S&P 500 Index ($SPX) gain of 10%.
Despite this, the latest Q4 earnings unveiled a narrative of metamorphosis within the company, promising a potential resurgence. Wall Street, infused with cautious optimism, now scrutinizes PayPal’s stock. Could this be the opportune moment to invest in PayPal? Let’s find out.
PayPal’s Q4: A Tale of Resilience
Several forces have shaped PayPal’s trajectory, ranging from its 2015 split from eBay to ongoing macroeconomic ripples, acting as impediments. However, transaction volumes are ascending, propelling revenue growth.
In 2023, PayPal tallied a total of 426 million active accounts, supporting an 8% surge in revenue to $29.7 billion year-on-year. Adjusted earnings for 2023 scaled by 24% as opposed to the previous year. In 2023, PayPal welcomed fresh faces to its C-suite and a new CEO. The recalibration in leadership and strategic roadmap could potentially fuel the company’s resurgence in the forthcoming years.
AI: A Catalyst for Growth
PayPal has undergone substantial overhauls in its repertoire, supplementing existing offerings with AI-fueled innovations. The introduction of AI-powered smart receipts empowers customers to monitor their purchases and receive tailored recommendations.
The launch of FastLane—one-click guest checkout—expedites transactions, reducing checkout durations by up to 40%. Moreover, a renovation of the checkout process through facial recognition software signifies PayPal’s commitment to enhanced efficiency.
Primarily attributing its size to lower profitability, PayPal aims to slash its global workforce by 9% by 2024. CEO Alex Chriss underlined, “2024 is a year anchored in executing strategies to fortify PayPal’s enduring success.” Aligned with Wall Street, the management projects the adjusted EPS to mirror the 2023 EPS of $5.10. Conversely, analysts anticipate a marginal uptick of 0.60% to $5.13 per share, accompanied by a 7% earnings surge. Forecasts further anticipate a 9.8% and 7.8% growth in earnings and revenue respectively by 2025.
Wall Street Chatter on PayPal Stock
Embarking on new growth trajectories under a fresh leadership realm holds the key to revitalizing PayPal’s trajectory, albeit it demands time. Bank of America Securities analyst Jason Kupferberg advocates patience for investors, deeming 2024 as a transitional juncture for the enterprise. Kupferberg opines that the fruition of the new strategies isn’t immediate, hence adjudging a “hold” rating and an associated price target of $64 for the stock.
On a similar note, Morgan Stanley recently reiterated a “hold” standing with a target price of $62.
In an overarching viewpoint, Wall Street endorses PayPal stock as a “moderate buy.” Amongst the 38 analysts scrutinizing the stock, 23 advocate a “hold,” while 12 endorse a “strong buy” and three affirm it as a “moderate buy.” The average target price stands at $69.56, reflecting a 6.8% uptick from ongoing levels. A lofty target price of $85 indicates a potential 30.5% upside within the next 12 months.
Trading at 11 times projected earnings for 2025, PayPal stands juxtaposed to peer Block(SQ), currently perched at 20 times the anticipated 2025 earnings.
The Potential and Promise of PayPal Stock
While PayPal’s tepid growth might deter some investors now, the strides made in company-wide transitions coupled with the ameliorating macroeconomic sentiments articulate its latent potential. In my view, PayPal’s stock presently resonates with a fair valuation, unravelling long-term opportunities within the e-commerce and digital finance realms.
On the date of publication, Sushree Mohanty abstained from any direct or indirect positions in the securities mentioned in this article. The information and data in this article are intended purely for informational purposes. For a more detailed overview, kindly refer to the Barchart Disclosure Policy here.
The opinions articulated herein are the author’s personal viewpoints and do not necessarily mirror those of Nasdaq, Inc.
