Financial technology company, PayPal Holdings (NASDAQ: $PYPL), has been a major force in digital payments for over 20 years, largely due to its popular online payment system.
However, since 2021, PayPal has struggled with a decline in its value as it faces difficulties in an uncertain market with many competitors. According to analysts, some of these challenges stem from interest rate hikes started by the Federal Reserve in early 2022.
In a recent interview with CNBC, PayPal’s CEO Alex Chriss admitted the company’s lack of success in recent years, but boldly promised to “shock the world.” Interestingly, after this upbeat statement, PayPal’s stock saw a substantial 15% increase.
Elon Musk’s 2024 Overhaul of X Aims at PayPal’s Domain
In a major revelation, Elon Musk, PayPal’s founder, has validated assumptions regarding his bold plans to transform platform X, previously called Twitter, into a comprehensive “everything app.” Musk envisions introducing peer-to-peer payments on X in 2024, positioning the platform to challenge dominant players like PayPal, Visa, and traditional banks.
X strives to become the Everything app, seamlessly combining different experiences into one unified interface accessible to all. The company seeks to unlock new commerce opportunities while redefining how users connect and engage within a sole platform.
“We will launch peer-to-peer payments, unlocking more user utility and new opportunities for commerce, and showcasing the power of living more of your life in one place,” X emphasized in a recent post. This all aligns with the company’s wider approach of evolving into a modernized version of PayPal, providing a comprehensive hub for financial transactions and more.
PayPal Stock’s Undervaluation Sparks Strategic Move
PayPal stock is still trading remarkably low price compared to 2021 levels, increasing its appeal to investors. The stock’s undervaluation has prompted management to take proactive measures, primarily through aggressive share buybacks.
Capitalizing on the undervalued stock, PayPal has repurchased nearly 5% of its outstanding shares in just one year. This strategic initiative conveys confidence in the stock’s prospects and meaningfully boosts earnings per share (EPS).
CEO Alex Chriss stresses a commitment to becoming more efficient and effective. This drive toward efficiency is expected to facilitate steady net income expansion, complemented by an assertive share repurchase agenda.
PayPal has demonstrated revenue growth of at least 6.7% over the past two years. If the company sustains its current buyback pace, maintains margins, and continues at this trajectory, its earnings appear well-positioned to surpass market forecasts.
PayPal’s Recent Stock Activity Shows Signs of Recovery
On Monday, January 22nd, PayPal’s stock price closed at $63.74 per share. This price is 2.45% lower than the previous trading day’s closing price. The company is currently up more than 15% from the 52-week low price of $50.25 set in mid-November.
Recent Performance Exceeds Expectations
PayPal achieved positive earnings growth in the last reported quarter, generating earnings per share (EPS) of $1.30 compared to $1.08 in the same period one year ago. Over the preceding four quarters, PayPal surpassed consensus EPS estimates three times.
The year-over-year change in profitability for the current quarter is calculated at +6.7%, reflecting a projection of $7.88 billion. In its most recent quarterly report, PayPal posted revenues of $7.42 billion, exhibiting +8.4% growth versus the prior year.
Analysts anticipate revenues of $7.88 billion for the upcoming quarter, pointing to an anticipated expansion of +6.7% year-over-year. Estimated total revenues stand at $29.63 billion and $31.96 billion for the current and next fiscal years, respectively, with projected growth of +7.7% and +7.9%.
Last quarter, PayPal’s reported revenues of $7.42 billion exceeded the Zacks Consensus Estimate of $7.39 billion, representing a positive surprise of +0.37%. The EPS surprise for the same period equaled +6.56%.
Final Thoughts
PayPal’s positive earnings trajectory, efficient operations, and calculated repurchases position it for future growth. Analysts highlight a strong link between earnings estimates and stock performance, aligning for a favorable outlook for Paypal and its investors.
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