Buy Low Spotlight: PayPal

PayPal (NASDAQ: PYPL) rocketed to success following its 2015 spinoff from eBay, with its share prices growing a stunning 740% by July 2021. But since then, share prices are back down by more than 80%. Why is this happening? Is PayPal a lost cause or an excellent opportunity to buy low?

What's New with PayPal?

On the surface, PayPal’s sudden stock drop might seem like a sign that the company is failing. But let’s take a look back at when it occurred. Share prices hit their peak at the height of the pandemic, when global shutdown orders led to unprecedented numbers of online transactions. Share prices then fell off a cliff as everything reopened and people returned to in-person shopping. Simultaneously, some PayPal competitors, including Apple Pay and Google Pay, started to take off.

But PayPal still remains an incredibly powerful company. Its 2023 revenue grew 8% YOY to $29.8 billion. Its annualized total payment volume (TPV) for the first quarter of 2024 was a staggering $1.6 trillion. Importantly, PayPal also continues to add users and sales. As it turns out, digital transactions aren’t going anywhere, even in the post pandemic era. In fact, e-commerce sales are projected to rise by about 16% per year for the next decade, and PayPal remains a popular choice.

What The Industry Thinks

Right now, Wall Street is concerned about competition in an increasingly saturated digital marketplace. But PayPal is currently trading at a price-to-earnings ratio of just 14.9, making it a potentially great buy. For the past five years, PayPal has had an average annual operating margin of more than 16%, generating billions in free cash flow and aggressively reinvesting that money into the company. Many analysts believe that PayPal is in an excellent position to take advantage of the tailwinds provided by the growing e-commerce trend. All things considered, the future looks bright for PayPal and those who invest in it.

Neither Lisa Fritscher nor Stocks.News has positions in this company.