1/ PayPal $PayPal(PYPL)$ has lost favour of investors since the end of 2021 and has been consolidating over the past year. As some of you already know, I like to be a contrarian, this time around PayPal is my contrarian idea.
2/ PayPal lost more than 15% in value after a double beat on revenue and EPS. Analysts are causing fear by overblowing lower operating margin guidance when prices are low.
3/ On a valuation aspect, PayPal is by far the cheapest in the sector, with the stock trading at 12.5x forward price-to-earnings ratio and a free cash flow yield of 7.17%
4/ Although stock-based compensation is still way too high, it is finally shrinking while increasing the effectiveness of the $4 billion in stock buybacks for FY23
5/ Right now, I have a 4.2% allocation of the company in my portfolio, I am not overly concentrated and happy to leave it there. I do feel I am missing some business strength and trust in the management to afford a higher concentration.
6/ Overall, PayPal's risk-reward is quite attractive at these prices. Further business improvements are likely to boost the stock higher with renewed momentum.
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