PayPal (PYPL) is a top fintech company that offers numerous services targeted to consumers and businesses.
Broadly, its business is divided into branded and unbranded solutions. Its branded solution is mostly made up of its digital wallets, while its unbranded solution came from its Braintree acquisition a few years ago.
PayPal owns companies like Venmo, Paidy, and Honey, a leading coupon site it acquired for $4 billion. It also launched PYUSD, a stablecoin with over $800 million in assets.
The company has over 429 million customers worldwide, who perform over 25 billion transactions annually.
As most people embraced online payments, PayPal was among the top pandemic winners. At the time, the stock jumped to a record high of over $300, boosting its market cap to more than $300 billion.
However, like most pandemic winners, the company has reversed, with its stock falling to $50 in 2023.
Recently, however, the stock has rebounded and was trading at $78.34 while its HypeIndex has risen to 97%.
Positive hype
In the past few weeks, PayPal has attracted positive hype as investors cheer its ongoing turnaround strategy led by the relatively new CEO, Alex Chriss.
The company has reduced its costs by laying off employees and launching new solutions to boost its unbranded business.
It recently launched Fastlane, a checkout product it hopes will lead to more volume flowing to its platform. It has inked a partnership with Adyen and other top payment companies.
PayPal’s PYUSD stablecoin is gaining market share in the industry with assets reaching over $800 million. PayPal hopes to make money by investing stablecoin cash and generating interest income.
The company’s financial results were strong, with its net revenues rising by 8% to $7.9 billion. Its transaction margin dollars rose by 8% to $3.6 billion.
PayPal has also attracted positive feedback from analysts. Baird, RBC Capital, and Barclays have an outperform rating, while Citi and Deutsche Bank have a buy rating. These analysts cite the company’s turnaround efforts.
PayPal is often seen as a highly undervalued company since it trades at a price-to-earnings ratio of 19 and a forward multiple of 16. Its enterprise value to EBITDA multiple is just 10.
The company’s stock recently formed a golden cross pattern as the 200-day and 50-day moving averages crossed each other while pointing upwards. In most periods, this is one of the most bullish patterns in the market. It also flipped the important resistance point at $70.7 into a support level.
Negative hype
PayPal has attracted some negative hype in the past few months.
PayPal is still losing active customers as competition rises. Its active users dropped by 0.4% in the second quarter to 429 million.
The company is facing substantial competition from the likes of Apple Pay, Google, and Amazon. It is also competing with Buy Now Pay Later companies like Affirm and AfterPay.
PayPal is no longer growing as it used to. Before and during the pandemic, it used to have double-digit growth, which seems unachievable for now.
PayPal’s stablecoin business will struggle to compete with Tether, which has the biggest market share in the industry.
Summary of PayPal stock
PayPal is one of the best-known brands in the financial services industry. It has over 429 million customers and is used by millions of companies globally. The firm has high margins, which will likely keep growing as its cost-cutting measures go on.
However, PayPal significantly differs from the one that existed a few years ago when it experienced strong double-digit growth. Instead, it has now become a value company with cheap multiples. Its trailing and forward PE ratio stands at 18 and 19, respectively.
PayPal also has a forward price to cash flow metric of 13.50, lower than the industry average of 14.5. Most importantly, the PayPal stock has formed a golden cross pattern, which often leads to more upside.
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