PayPal Holdings, Inc. (NASDAQ: $PYPL)

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PayPal Holdings Inc. (NASDAQ: PYPL) is a multinational fintech company that operates a digital payments system. Its services are available in most countries that support online payments as an alternative to paper-based payments.

PayPal Recent Performance

PayPal Holdings is a pioneer in fintech. It practically invented the category with its payment solutions. However, in recent years, the company has faced intense competition. As fintech becomes mainstream, the company has run into headwinds, including ongoing inflation.

Given its recent struggles, it did not surprise investors when the company announced an executive leadership change on November 15, 2023. Alex Chriss, the new CEO, has promised to revamp the business.

In his first earnings call, the new CEO said that PayPal had become a large and complex organization, making it hard to focus on a specific niche, mission, or purpose. He said he would work to find a path forward for the company.

The main challenge to PayPal in the future is the competition. Companies like Apple and Block have taken a growing piece of the pie, which will chip away at PayPal’s dominance.

Since coming on board, the new CEO has made specific changes that will have a long-term impact. For instance, PayPal now allows users to send customized gift cards from major retailers via Venmo, a subsidiary of PayPal Holdings. Additionally, the company has revamped its early fraud detection systems.

The company has also entered into new partnerships. For instance, users of Apple Play can now access the service using Venmo on their devices. It has also partnered on various small business initiatives with Meta Platforms.

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PayPal Earnings Report

Based on its most recent earnings report, PayPal remains the dominant player in the fintech sector. For Q3, 2023, the company reported a total payment volume of $387.7 billion, a 13% growth on an FX-neutral basis. Its net revenue for the quarter was $7.4 billion, representing a 9% FX-neutral growth. According to the report, its operating cash flow was $1.3 billion, with a free cash flow of $1.1 billion.

It beat analysts’ EPS and revenue estimates in Q3. The reported revenue of $7.4 billion was better than the projected $7.38 billion, a surprise of 0.47%. Earnings per share was reported at $1.30, beating the projected EPS of $1.23 by 5.78%. In the past four quarters, PayPal has beaten EPS estimates 75% of the time.

In the outlook section, the company expects net revenues to grow 7%-8% in Q4 on an FX-neutral basis. EPS is projected to be around $1.36, representing a 10% increase. For FY23, the company projects an EPS of $.9, representing a growth of 21%.

PYPL Stock Forecast

PYPL stock has had a great run in the past month since the earnings report came out, and it announced a leadership change. Its stock is up 14.53% in the past month.

At the close of the last trading session on Tuesday, November 28, 2023, the stock was up 3.69%. However, it is still down -21.60% year-to-date. Its current $58.47 per share is just above its 50-day moving average price of $56.15 and below its 200-day moving average of $65.74.

Based on its recent performance, stock analysts have given the company a moderate buy rating. They give the stock a high price target of $118 and a low of $55. Based on its average price target of &8.29, it has a potential upside of 33.90%.

Should you Buy PYPL Stock?

PayPal had an annual total payment volume of $1.36 trillion in 2022. In its most recently reported quarter, TPV was up 13% on an FX-neutral basis. While that has slowed down from the highs it achieved during the COVID pandemic, it still retains excellent momentum.

Statista states digital payments are projected to grow at a CAGR of 11.8% by 2027. In 2027, the sector will reach a transaction value of $14.8 trillion. That is almost ten times the current TPV of PayPal.

As such, investors in PayPal stock can be confident of the continued growth in e-commerce transactions. That growth will lead to organic growth for PayPal. With its revamped strategy, it could significantly grow its market share.

Based on these numbers, the moderate buy rating given by analysts is an accurate representation of PYPL stock’s potential.

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