We’ve been long on Paypal for quite a while and we’re back with an adjusted price target thanks to this really wild volatility season.
Paypal smashed through our first two price targets before hitting the same brick wall the rest of the market did in late 2021. Some companies deserved to have their valuations compressed like this, but we’re of the view that Paypal still has a compelling case for growth.
Paypal is maintaining its strong growth compared to the underlying e-commerce industry, and even though their management team reduced guidance for this year, they are pushing towards long-term consumer growth that should help them recover fast even in this volatile market.
Paypal stock is trading at a price-to-earnings multiple of 26x right now, which may as well be a different universe compared to their high of 57x earnings. Paypal is looking more and more like a value play.
Let’s get into it 👇
Paypal ($PYPL) Overview:
So, the major reason Paypal is down 12% on the week leading up to this post is that PYPL management released reduced revenue guidance during their Q1 earnings call a few weeks back. Basically, management came out and said that the company would be growing revenue at a slower rate than they predicted before.
This combined with the rest of the NASDAQ selling off to crush PYPL’s valuation down to current levels.
This looks like a classic case of a stock getting oversold. But reducing guidance like this was probably a solid move by management to get out ahead of a potentially choppy market. However, the fundamentals here are still strong, which opens up a long-term value play for Paypal investors.
- So what’s the long-term play?
- What’s our price target?
- And when do we believe it’ll happen?