$PayPal(PYPL)$ 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
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