HomeMost PopularPayPal: A Potential Turnaround Story in Stock Market Analysis

PayPal: A Potential Turnaround Story in Stock Market Analysis

Actionable Trade Ideas

always free

PayPal Experiments With More Traditional Banking Services

PayPal Holdings (NASDAQ:PYPL) experienced a significant decline after reaching its peak around $300 in 2021. The stock had a substantial surge during the online buying frenzy caused by the COVID-19 pandemic in 2020 and 2021. However, the stock faced a major setback when purchasing conditions returned to normal. Currently, the stock shows signs of recovery from the decline and is at the start of an upward trend.

PayPal has the potential for a strong turnaround due to its attractive valuation and above-average expected revenue and earnings growth. The stock is currently at a favorable technical turnaround level, and new catalysts can drive further positive momentum.

Potential Positive Catalysts

The appointment of Alex Chriss as the new CEO could be a positive catalyst for PayPal. Chriss, who previously held executive positions at Intuit, has a track record of driving customer and revenue growth. His leadership during the $12 billion acquisition of Mailchimp expanded business capacity and the customer base. With Chriss at the helm, PayPal may find new sources of revenue, expand its customer base, and pursue add-on acquisitions.

PayPal is likely to benefit from the long-term growth of digital payments, with the market expected to reach $5,848.5 trillion by 2030. The company is investing in areas such as branded checkout, merchant solutions, and digital wallets, which are crucial for increasing market share in the e-commerce industry.

Expected Growth

Analysts predict that PayPal will experience above-average revenue and earnings growth in the next two years. Revenue is expected to increase by approximately 8% in 2023 and 9% in 2024. Earnings are projected to grow by about 20% in 2023 and 14% in 2024. The company’s historical average annual earnings growth rate over three to five years is around 17%. Meeting or exceeding these expectations could have a positive impact on the stock.

Technical Perspective

From a technical standpoint, PayPal’s stock chart indicates a recovery from a recent significant pullback. The bullish MACD crossover and rising RSI suggest a potential reversal with strong positive momentum. If the stock continues to perform well and meets or exceeds earnings expectations, it could rise to the resistance level at $76 within approximately six months. The stock has previous experience reaching this level, and conditions are favorable for PayPal’s success in 2024.

The chart above demonstrates the discrepancy between PayPal’s EPS and its stock price. Similar situations in the past have resulted in significant upward movements for the stock. As the company continues to grow and investors recognize the current undervaluation, PayPal has the potential for another strong run higher.

Attractive Valuation

PayPal is currently trading at a low forward PE ratio of just under 13x, which is below the average for the Credit Services industry. The company also has a low PEG ratio of 0.77, indicating a favorable valuation compared to expected earnings growth. With room to move higher, PayPal presents an attractive investment opportunity.

Risks to Consider

Competition remains a constant threat for PayPal, as it faces competition from traditional banks, debit and credit cards, and various digital payment solutions. Changes in consumer behavior or government regulations regarding online payments could impact the company’s market share.

Long-Term Outlook

In the long term, PayPal’s outlook is positive. The company has a strong market position, with over 50% market share in online payment processing and more than 426 million active accounts. PayPal’s trusted brand and first-mover advantage will continue to drive its growth. Analysts have a one-year price target of $86 for the stock, indicating a potential 35% increase from the current price.

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.