PayPal's Stock Is Starting to Be Quite Appealing

PayPal's Stock Is Starting to Be Quite Appealing

PayPal's stock has been caught in a mean bear.

Check out the chart:

PYPL Stock Chart, Source E*TRADE

The stock's lost about 80% of its value in just about 2 years. But the company is still profitable. The annual earnings and estimates are as follows:

.PYPL Earnings, Source: E*Trade

This said, both sales and earnings growth are decelerating. The company is seeing intensifying competition from the likes of Square (Block), Stripe, Apple Pay, Google Pay, Shopify, Amazon Pay, not to mention incumbents FIS and Fiserv, and card processing majors Visa and Mastercard. No wonder activist investor Elliott Investment Management recently dissolved its stake.

But the company has a number of levers it can activate to repel rivals and even thrive. It can increase the number of transactions per installed account (it's still the dominant provider after all), even if the total number of accounts does not grow nearly as fast as it used to. Further, the payments market is expected to grow very fast over the next decade, providing a huge tailwind.

Plus, the company is actively streamlining costs and starting to boost margins, with some early success. The company can monetize emerging business units like Venmo. A new CEO starts in late September and may help reinvigorate sales and profits. Further, the company is buying back shares, adding fuel to the bull case. 

total transactions (+1%) x transactions per account (+5-7%) x margins (+5% impact) x buybacks (+3%) my result in a 15% boost of prospects (sales, profits). A major reboot may be in the works.

Time to go long...


The Team

No advice, we're wrong way too often, just fun.