[Earnings Season] Is PayPal is a buy now?

kneegears123
2022-02-20

$PayPal(PYPL)$ recently released a discouraging fourth quarter earnings on 2nd Feb, causing the stock's price to fall sharply. As of 18 Feb, PayPal has dived past its 52-week low price, and is projected to continue plumetting. In this report, we will analyse key statistics, financials, and history to decipher if PayPal is a buy.


Earnings Report:

PayPal reported fourth quarter revenue of $6.92 billion which slightly beats the estimates of $6.89billion. Earnings per Share (EPS) was reported at $1.11 per share, falling short of estimates by $0.01, In the quarter, PayPal did not fufill user growth guidance - The creation of 4.5 million illegitimateaccounts.

Currently, management lowered their forecasts for revenue in 2022 from 18% growth to 15%-17%. 


What happened between PayPal and eBay?

eBay's transition to its own payment platform spun off PayPal, stemming PayPal's downgrade in revenue growth. This places about $600 million ofpressure on the company in the upcoming year. 


The brightside

Despite PayPal's fourth quarter earnings annoucement, it shouldn't affect the company's business or performance from a long-term perspective. Many investors forget that in FY 2021, PayPal did surpass $1 billion in total payment volume. They also had a growth in revenue and earnings of 18%-19%, which is rather impressive. 

This shows that stripping eBay out of PayPal's operational results still ensured more robust growth.


PayPal sizable cash position of $16.3 billion is close to doubling its $9 billion debt warrants investors' consideration. PayPal's ability to generate cash flow is more impressive - An increase in cash from operations and free cash flow of 31% and 38% respectively in the fourth quarter. 


What does the future holds?

PayPal recently announced a partnership with Amazon, enabling customers to checkout via Venmostarting this year. Venmo, which is acquired by PayPal in 2013, has 80 million users, offering a buy now, pay later service, available in eight markets.Their long-term prospects shows a lot of room for growth.


Conclusion

The latest sell-off might suggest that the stock of the company might be selling for a bargain, considering its future growth prospects. Shares of PayPal will be likely to continue dropping over the next few days or weeks, but long-term investors might want to consider this high-valued companyto add into their portfolio. This might just be a bump in the road, like any other blue chip companies.


@TigerStars


Source: Nasdaq.com, Luke Meindl - The Motley Fool

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • CY09
    2022-02-21
    CY09
    they are a buy but just on downtrend. based on future earnings of $5 per share, anything below 100 is buy
    • mantaru: 
      will wait for sub 100
    • kneegears123: 
      Definitely, thanks for sharing. Waiting on the downtrend.
  • SteadyDoesIt
    2022-02-22
    SteadyDoesIt
    Given slowing growth, I’d be cautious about entry price. This company appears to be becoming more of a mature company. The current price looks decent if comparing to last year but consider sentiment
    • kneegears123: 
      Well said, takes a lot of precision to decide when to take a position, fully agreed.
  • Asphen
    2022-02-22
    Asphen
    yes, it is certainly a buy now. Fair value of 83, conservatively it reach 162.
  • Tilon_Song
    2022-02-22
    Tilon_Song
    It's always a good time to buy a stocks when it's undergoing recession, just that you need to strategize and allocate the fund used on it wisely.
    • kneegears123: 
      Agreed, given the current market situation, it's inevitable.
  • Nylegnave
    2022-02-23
    Nylegnave
    Would he cautious about entry price for short term and weary about long term growth as they are reliant (at the mercy of) other commerce platforms such as eBay & Amazon, should they play them out.
  • ThaiGirl
    2022-02-23
    ThaiGirl
    Don't pay n pay for a stock by being in love with the stock.
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