[ad_1]
Image source: Getty Images
Up 10% in January, PayPal (NASDAQ:PYPL) stock looks like it’s going for $100. However, the stock underperformed in February on the back of the company’s Q4 earnings results. So, this is why the current stock price offers a buying opportunity when it is below $100.
Investing to pay off
Diving into the numbers, the fintech company actually posted pretty solid results. Most metrics beat analyst estimates, and the guidance provided for 2023 was also ahead of Wall Street forecasts.
More importantly, the group reported an improvement in both GAAP and non-GAAP EPS. This suggests that it is possible to increase shareholder value despite a difficult macroeconomic environment. And with margins guided to expand throughout 2023, it’s puzzling to see PayPal stock doing so well after launch.
| Metric | Consensus | Q4 2022 | Q4 2021 | Growth |
|---|---|---|---|---|
| results | $7.39 billion | $7.38 billion | $6.92 billion | 7% |
| Total payment volume (TPV) | $360.3 billion | $357.4 billion | $339.5 billion | 5% |
| Total Active Account (TAA) | ? | 435m | 426 m | 2% |
| Payment transactions per active account (TPA) | ? | 51.4 | 45.4 | 13% |
| New Active Account (NAA) | ? | 2.9 m | 9.8 m | -70% |
| Non-GAAP earnings per share (EPS) | $1.20 | $1.24 | $1.11 | 11% |
Macroeconomic headwinds are likely to continue for a while, and the resignation of CEO Dan Schulman is likely to weigh on investor sentiment. But that shouldn’t diminish the benefits of investing in PayPal stock, and there are plenty of them.
fruitful opportunity
The e-commerce industry continues to grow rapidly, and there is no better player to take advantage of it than PayPal, with its impressive market share. Critics will be quick to point out Apple and Google Pay takes a share. However, there is limited definitive evidence to support this as PayPal continues to grow aggressively in its core markets.
The competition argument is also not very convincing at this point. This is because the adoption of digital wallets is still in the growth stage. With less than half the population in the core market being penetrated, there is still a lot up for grabs.
Get a discount
All that said, the strongest case for buying PayPal stock today is that its valuation multiple suggests the stock is currently selling at a discount. It may not seem like a high P/E ratio today, but it is worth remembering that this is the final figure.
The business expects to continue cutting costs, which should support underlying growth in the coming months. As a result, stock forecast analysts will have a lower forward P/E. In fact, it is less than the industry average, and in line with it S&P 500‘s average is 22, which is a great value for growth stocks.
| Metric | PayPal | Industry Average |
|---|---|---|
| Price-to-earnings (P/E) ratio. | 35.2 | 27.2 |
| Price-to-earnings ratio (FP/E). | 22.4 | 25.9 |
In addition, the conglomerate also has a solid balance sheet. Although the debt-to-equity ratio is relatively high at 53%, cash and equivalents are sufficient to cover its obligations. And with margins expected to widen next year, the growing bottom line should provide additional coverage.
So it’s no surprise to see the broker rate the stock a ‘buy’ with an average price target of $108. This represents a 45% increase from the current price. That’s what he likes JP Morgan, Morgan Stanleyand Wells Fargo all bullish on payment providers. Thus, I reiterate my position that PayPal stock is a must-buy for my portfolio, especially at these levels.
[ad_2]
Source link