What do Wall Street’s experts think about PayPal (NASDAQ:PYPL)? Their assessments are mixed, and it seems like the market doesn’t have a clear vision for PayPal. Nevertheless, my PYPL stock analysis remains bullish. Moreover, I encourage investors to give PayPal a chance as 2024 could be the company’s turnaround year.
PayPal CEO Alex Chriss sees 2024 as a “transition year” in which the company will be “focused on execution to position the business for long-term success.” It feels like some short-term traders aren’t willing to wait for PayPal to navigate this transition. If you have the time and the patience, however, you can build wealth simply by holding PayPal stock.
Some Analysts Are Bearish on PYPL Stock
All in all, PayPal’s fourth-quarter 2023 financial results were pretty good. The company generated net revenue of $8 billion, up 9% year over year. Plus, this result came in ahead of the analysts’ consensus estimate of $7.88 billion.
Furthermore, PayPal reported GAAP earnings of $1.29 per share, versus $0.81 per share in the year-earlier quarter. Wall Street, meanwhile only expected PayPal to have earned $1.18 per share in Q4 of 2023.
On the other hand, PayPal expects to earn $5.10 per share an a non-GAAP basis in 2024. This implies flat growth (i.e., no earnings growth) this year when compared to 2023. This, I believe, has put some analysts in a bad mood when it comes to PayPal. For instance, Argus analysts cited PayPal’s disappointing forward guidance when they lowered their rating on PYPL stock from “buy” to “hold.”
In a similar vein, Daiwa Capital Markets analyst Kazuya Nishimura downgraded PayPal shares from “outperform” to the equivalent of “neutral.” Evidently, Nishimura isn’t eager to wait for PayPal to navigate its transitional year:
“With 2024 to be a year of plan execution, as the company says, we think it will take some time before service improvements are reflected in earnings and it will probably be challenging to discern growth potential for EPS over the medium term.”
Shaking Out the Weak Hands
In contrast, Truist analysts reiterated their “buy” rating on PYPL stock. They acknowledged that the recent PayPal share-price decline resulted from the company’s disappointing guidance. However, the Truist analysts expect that this will ultimately “shake weak hands.” In addition, they believe that PayPal’s key metrics are “bottoming” while the company’s turnaround gets underway.
Analysts with Piper Sandler weren’t entirely enthusiastic about PayPal, as they maintained their “neutral” rating on PYPL stock. However, the Piper Sandler analysts did observe (according to TheStreet) that “PayPal’s operations beat estimates this quarter as payment volume and the transaction take rate exceeded its expectations.”
Overall, the analyst community can’t deny that PayPal’s actual fourth-quarter results were decent. Their main problem with PayPal is the lack of clarity about how PayPal will perform this year.
Many investors and analysts can’t tolerate a lack of clarity. They want companies to issue highly optimistic and confident statements about future revenue and profits. I actually respect PayPal’s management for not giving people what they want.
If PayPal’s earnings in 2024 are similar to the company’s earnings in 2023, so be it. This wouldn’t be such a terrible outcome. Maybe the the company will do better and surprise investors and analysts. Then, all of a sudden, the downgrades would flip to upgrades – but if you’re patient and forward-thinking, then you’ll want to invest in PayPal before that happens.
PYPL Stock Analysis: Do You Have Weak Hands, or Diamond Hands?
Some stock traders and analysts just don’t want to wait and see if PayPal will successfully navigate its transitional period this year. Some folks are just selling PayPal stock now because there’s not enough clarity and confidence in the future.
Yet, successful investors can tolerate a certain level of uncertainty. PayPal provided realistic, muted forward earnings guidance. This should be commended, but some “weak hands” just gave up on the company. So, if you’re patient and can envision a turnaround for PayPal in 2024, your PYPL stock analysis should be bullish and you can take a share position today.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
