![]() ![]() Is PYPL Stock a Buy, According to Analysts? In my opinion, this blend makes for a rather compelling opportunity. Precisely, consensus estimates point towards adjusted EPS reaching $7.82 by FY2026-end. While this is not particularly high in current market conditions, it becomes more attractive when you factor in the projected EPS CAGR (compound annual growth rate) in the mid-to-high teens over the next few years, as consensus estimates indicate. However, this estimate is adjusted and doesn’t account for stock-based compensation, so the actual P/E ratio on GAAP earnings could be slightly higher, ranging from 13 to 15 (assuming a reasonable range of SBC).ĭespite this, its P/E ratio is still modest, providing an earnings yield of approximately 7% to 8%. This raises the question of how undervalued the stock truly is.Īccording to management’s projection, PayPal stock is trading at a forward P/E ratio of 12.3. Is PayPal Stock Actually Undervalued?ĭespite projections of record adjusted earnings per share this year, PayPal’s shares are currently trading 22% lower than they were last year and a staggering 80% lower than their 2021 highs. In particular, management now expects adjusted earnings per share to grow by 20% to about $4.95, which is 2% higher than the guidance the company shared back in February. That said, most investors seem to be overlooking the company’s full-year guidance, which points towards a new record in profitability. ![]() It clearly implies notable sequential deceleration, a trend the market never likes to see. For the quarter, management expects revenues to grow by roughly 7.5% to 8.0% on a CC basis and by about 6.5% to 7.0% based on the current spot FX rates. If there was something that the market found distasteful, that would be the company’s guidance for Q2. Overall, it looks like this was an excellent quarter for PayPal, both operationally and financially. On an adjusted basis, which excludes stock-based compensation and other non-cash items, earnings-per-share grew by 33% to $1.17. Earnings per share (EPS) also grew by a significant 61% to $0.70. The combination of double-digit revenue growth against a much humbler mid-single-digit growth in operating expenses resulted in substantial operating income growth of 46.6% to $999 million. Hence, total operating expenses grew by just 4.7% to $6.04 billion. In fact, customer support, sales & market, technology & development, and general & administrative expenses all declined compared to the prior-year period. Still, the company was able to control most of its other operating expenses. ![]() When it comes to PayPal’s expenses, total volume-based expenses grew by 17%, while transaction margin dollars grew by 1%, resulting in total transaction expenses (which comprise just over half of PayPal’s operating expenses) growing by nearly 18% to $3.3 billion. This growth was primarily driven by higher interest income on customer store balances and strong consumer and merchant credit performance.Ĭonsequently, the company was able to post total revenue growth of 10.4% in CC to $7.04 billion, which was actually about 1.5 percentage points higher than management’s prior guidance that targeted ~9% CC growth. Specifically, Total Payment Volume (TPV) came in at $354.5 billion, rising by 10% year-over-year or by 12% on a constant-currency (CC) basis.Īdditionally, there was a noteworthy 39% increase in revenue from value-added services, totaling $676 million. While investors may have had a negative reaction to PayPal’s Q1 results, the company has positioned itself to achieve new levels of profitability this year.įor the quarter, Transaction revenues advanced 6% to $6.4 billion, driven primarily by higher processing volumes. ![]() Q1: Setting the Stage for Record FY2023 Profits The company generates strong free cash flow, keeps returning substantial amounts of cash to shareholders, and appears to be trading at a rather attractive valuation. That said, PayPal’s most recent results demonstrated that its core business model remains intact. Take Block ( NYSE:SQ), for instance, which despite growing its revenues by 26% in Q1, failed to achieve positive net income. The increasing competition and unstable trading landscape have led to less promising prospects for profitability. This is likely the result of investors treating PayPal similarly to most fintech companies, which have been underperforming in the current environment. Shares of PayPal ( NASDAQ:PYPL) are currently trading at 6-year lows, with the market lacking confidence in the company’s medium-term outlook despite its rather robust results. ![]()
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