Investors of PayPal (NASDAQ:PYPL) experienced a disappointing year in 2023, with PYPL shares decreasing by 18%, in stark contrast to the S&P 500’s gain of 25% and the Nasdaq 100’s 50% return.
Despite this, shareholders are hopeful for a resurgence in 2024. However, I maintain a cautious outlook for the new year, as PYPL shares may not experience a significant bull run.
For context, I last covered PayPal stock in October, suggesting a “Buy” rating. Since then, PYPL shares have shown an 18% increase. In this article, my focus shifts to PayPal’s 2024 outlook rather than short-term prospects.
The Road Ahead in 2024
In Q3 2023, PayPal underwent a change in leadership, with a new CEO (Alex Chriss) and CFO (Jamie Miller) taking charge. The new management faces the critical task of addressing the declining active user base, which saw a consistent decrease throughout 2023. This decline could be attributed to PayPal’s contentious policy update aimed at preventing the use of its services for spreading misinformation. Rebuilding customer trust should be the top priority for the new management team in 2024.
In established regions such as the United States and parts of Europe, PayPal’s market penetration is already high, potentially limiting room for expansion. Additionally, intensifying competition in the digital payment industry could make acquiring new users costly for PayPal.
Given these challenges, the 2024 management team might pivot towards alternative ventures like “Buy Now, Pay Later” and Crypto, as well as investing in unbranded checkout (Braintree) for potential growth. Despite the marked growth in Braintree’s revenues in 2023, there is still untapped potential, albeit at the cost of transaction margins.
Analysts’ Projections for 2024
Analysts foresee PayPal’s sales for FY 2024 to range between $31.3 billion to $33.3 billion, with the consensus at $32.17 billion, hinting at an 8.6% YoY growth. When it comes to profitability, estimated earnings per share range from $5.26 to $6.13, with a consensus at $5.6, pointing towards a 12.5% YoY rise in EPS.
These stable revenue and earnings projections for PayPal in 2024 indicate cautious optimism among analysts, but the road ahead remains uncertain.
