Considering PayPal's current price dip beneath $80, is it a wise investment decision?
PayPal's journey in the 2020s has been a rollercoaster ride, to say the least. The company shined during the pandemic, but it's had its fair share of downturns as U.S. consumers began to venture out more. A promising 2024 was followed by a disappointing earnings report earlier this year, and the stock hasn't been breaking any records since. So, can PayPal (PYPL -3.45%) rescue itself from its current sub-$80 slump and potentially claw its way back to its pandemic-era price peaks?
The Bottom Line
PayPal's digital payments platform is more ubiquitous than your favorite coffee shop. If you haven't used it, where have you been? It's the go-to option for online, mobile, and in-person transactions, ruling the roost as the No. 1 mobile digital payment platform in the U.S., according to recent research. PayPal's app is used by roughly 434 million active accounts, which translates into a tidy revenue stream. The company racked up nearly $7.6 billion in transaction revenue alone in Q4 2024, with total revenues of $8.4 billion. That's a respectable increase of 9% year-over-year, although it lags behind some industry heavyweights like Visa and American Express.
PayPal's profitability has been a bit of a letdown, with non-GAAP adjusted net income dipping by 2% year-over-year in the quarter to just over $1.2 billion. Gross margins have also taken a hit, slipping from the 60% level during the pandemic to the mid-40% neighborhood. So, for many investors, PayPal's story has been one of unspectacular growth and weakening profitability, which might explain why there's a bit of frigidity in the market toward the stock right now.
Reigniting the Brand
New CEO Alex Chriss and his team are making a concerted effort to push the envelope, pimping PayPal's services as the convenience store of digital transactions. Their ad campaign, headlined by comic actor Will Ferrell, might not have the same star power as Visa and American Express (or Lego, for that matter), but it's a start. PayPal's Fastlane technology, aiming to smooth out online purchases, is another promising initiative. Although it's gaining traction with merchants, Fastlane is still a few steps away from becoming ubiquitous.
Patience is a Virtue
So, what's the takeaway here? If you're a patient investor, you might find some value in PayPal. The company's user base is a significant advantage, providing a solid foundation for its ambitious goals.That being said, don't expect any blockbuster price surges in the short or even medium term. But with the right strategy, PayPal might just crack the code and break through its current impasse.
Sources:[1] MarketBeat, PayPal Stock Forecast
[2] WalletInvestor, PayPal USD Price Prediction
[3] Finder, PayPal Stock Price Forecast
[4] Yahoo Finance, PayPal Stock Price, Revenue, and Historical Data
[5] Investopedia, PayPal Stock Forecast (Financial Metrics)
PayPal's financial performance in the current market is underperforming compared to financial giants like Visa and American Express, with its non-GAAP adjusted net income decreasing by 2% year-over-year. Investors looking for effective capital growth might find the stock's current sub-$80 price less appealing, given its pandemic-era price peaks. However, the company's digital payment platform remains ubiquitous, with its app used by over 434 million active accounts, generating significant revenue streams. To revitalize its brand, PayPal has launched an advertising campaign featuring comic actor Will Ferrell and is investing in technologies like Fastlane to simplify online purchases. Despite the challenges, patient investors might find value in PayPal due to its large user base, providing a solid foundation for its future growth plans.
