PayPal Holdings Inc. (NASDAQ:PYPL) has recently faced stock price weakness and a few developments that have negatively impacted investor sentiment. The departure of Elliott Investment Management, which was seen as a catalyst for PayPal stock, has contributed to its 52-week low price. Nonetheless, this presents a great opportunity for contrarian investors.
Contrarian Buy: PayPal Holdings After Elliott Investment Management Exit
Elliott Investment Management disclosed in its 13F filing that it is no longer invested in PayPal Holdings, resulting in selling pressure following the fintech’s quarterly earnings release. The investor’s exit marks a significant change after their widely anticipated involvement in share repurchases and cost control initiaves.
Despite the investor’s departure, PayPal Holdings has made progress in reducing expenses and buying back its own shares, making it an attractive investment option. The company’s low earnings multiple further adds to its appeal.
Margin of Safety Following Elliott’s Exit
PayPal Holdings’ resilient guidance for 2023 and its expectation of ~$4.95 per share in adjusted earnings make the current stock price of just $60.98 highly attractive. The projected earnings multiple and valuation demonstrate a high margin of safety. Additionally, with its vast customer base of 431 million users, PayPal Holdings is the largest fintech enterprise globally.
Growth Opportunity for PayPal Holdings
PayPal Holdings has a significant opportunity to expand its Buy Now, Pay Later (BNPL) offerings in the digital payments industry, which can fuel its total payment volume (TPV). The rise of BNPL payments in the eCommerce segment presents considerable growth potential for PayPal. The company has also signed a multi-year deal with Kohlberg Kravis Roberts & Co. to sell current and future BNPL loans, allowing PayPal to focus on origination.
Potential Challenges for PayPal Holdings
Although PayPal Holdings faces some challenges, such as slowing growth in the economy and potential defaults in personal loans, its large reach and steady stream of transaction revenues provide stability. However, any decline in active accounts could impact PayPal’s short-term performance.
Currently, PayPal Holdings represents a unique opportunity for investors seeking a contrarian approach. The stock’s recent decline, the company’s commitment to cost reduction, and increased share repurchases make it an attractive investment choice. As a result, PayPal Holdings may become a significant portion of my portfolio.
Make a contrarian move and consider PayPal Holdings today.