PayPal (NASDAQ:PYPL) stock recently hit a six-year low at $53.94 per share, raising questions about market dynamics and competition from players like Stripe and Adyen. However, despite this temporary setback, PayPal’s projected EPS is set to triple to $4.95 for the coming year, making it a compelling growth story.
With a user base exceeding 431 million, PayPal stands strong against its competitors. Block has 44 million active users, while Adyen serves only 10,000 businesses and 40,000 consumers. PayPal’s modest P/E ratio of 9 and potential for substantial valuation increase make it an attractive investment option. The company consistently generates significant cash flows year after year, making it impossible to ignore its investment potential.
Market Perception: A Questionable Story
PayPal’s decline in stock price triggers memories of its prime as a sought-after investment in June 2017 when it boasted an impressive EPS of $1.47. The contrast between then and now raises questions about the challenges PayPal faces in today’s financial landscape.
Although analysts project an EPS of $4.95 for the coming year, this growth story hasn’t translated into an increase in stock price. This prompts contemplation on how PayPal positions itself against formidable competitors like Stripe, Adyen, and Block. However, PayPal remains a giant, set to achieve an EPS of $5.6 next year. Its true strength lies in its colossal database, with over 431 million active users, making it a valuable asset in an era where data is highly valued.
Valuation metrics also favor PayPal, with a P/E ratio of 9 compared to the sector’s average of 15. This suggests that the market undervalues PayPal, potentially overlooking its extensive user base. Even at this conservative multiple, PayPal becomes an enticing acquisition prospect.
While PayPal may seem undervalued, historical premiums for financial companies indicate a potential sales price of $56.5-$58.24. This figure reflects PayPal’s true worth and highlights its potential for growth and recognition.
Investing in PayPal comes with risks, including fierce competition in the fintech sector, potential regulatory hurdles, and the constant threat of cybersecurity breaches. The company’s reliance on technology and susceptibility to economic downturns further increase vulnerability. Currency exchange fluctuations and dependence on partnerships add complexity to the risks investors must consider. A well-informed investment strategy requires navigating these challenges and staying attuned to market dynamics.
Conclusion: Unleashing PayPal’s True Potential
PayPal Holdings, Inc. is currently undervalued at just 9 times next year’s projected EPS. However, this modest valuation fails to capture the true essence of PayPal’s potential. Beyond the market fluctuations and numerical figures, PayPal’s story is one of adaptability and untapped potential. Its massive user base provides a strategic advantage that positions PayPal as an enticing prospect for strategic acquisitions and partnerships in the ever-evolving financial landscape.