Investing.com — PayPal (NASDAQ:) stock has been the focus of debate lately, particularly regarding its bullish sentiment, or lack thereof.
As the company continues to navigate challenges, analysts have evaluated the stock and analyzed what could boost its growth potential and market success.
PayPal stock continues to struggle
PayPal's stock price is a far cry from its 2021 highs of more than $300 per share. It is currently languishing above $64.
But that still doesn't show the whole picture. Although the company's stock price is up 5.6% year-to-date, it has actually lacked any real upward momentum since hitting a low of $50.25 in October 2023. Over the past 12 months, PayPal stock is down 14.5% year over year. Last 12 months.
Daiwa analysts recently downgraded the company's stock from “outperform” to “neutral,” citing the company's “conservative guidance.” The company also said that it believes it is difficult to project medium- to long-term EPS growth for the company until trading margin dollars return to a clear growth trajectory and the benefits of enhanced investment emerge.
Meanwhile, Argus downgraded PayPal stock from “buy” to “hold” following the company's fourth quarter results. They say, “We expect overall PayPal payments growth to slow in 2024 due to rising interest rates and increased competition.”
Bernstein talks about the bull market in PayPal stock
So what is the bull case for PayPal stock?
Bernstein analysts believe that the stock's 8% FCF yield and 2025 P/E ratio of 15.5x (13x cash) is a very attractive valuation.
“Peers that have significant overlap with elements of PayPal (e.g., Braintree, Venmo) are trading at higher valuations,” the company added. “Cash is about 20% of market capitalization, and the company plans to buy back about 8% of its stock over the next year.”
Plus, they believe the bar is pretty low. The sell side is projecting a MSD GP growth CAGR from 2024 to 2026E, but the buy side's numbers are already several points lower.
“New management has been consulting with investors in recent weeks and has indicated that guidance is 'cautious,'” Bernstein said. “Exiting the unprofitable deal (at Braintree) may (ostensibly) mean the gross profit outlook could improve.”
The company also highlighted new initiatives such as an improved button experience, Fastlane, and the rollout of PPCP, which it said are not reflected in the numbers and could accelerate growth.
Bernstein also said PayPal management has said the button's trajectory is better than investors thought and that the company may disclose more information on its investor day. It pointed out.
“Improved consumer experiences, improved wait times, and perks could slow button smearing,” Bernstein analysts said. “Further operating cost reductions may also occur over time. In the bullish case, this stock could benefit from growth in HSD ecom, growth in MSD Buttons, unbranded operating profits and the prevention of stock buybacks.” The initiative has the potential to amplify earnings for teenagers.”
Overall, the company believes that a bullish price target could exceed $100 per share, and that it could be rerated to at least a market multiple.
