At around $60 PayPal (NASDAQ:PYPL) stock is trading about where it was way back in 2017. All the gains made over the ensuing seven years were wiped out by Wall Street’s Negative Nancy attitude.
PYPL stock plummeted because of competition and short attention spans. Shares have dropped 80% from their 2021 peak, but pay them no mind. PayPal is still a growth story, albeit one that will move in fits and starts. Here’s why the payments platform deserves closer consideration by investors.
The 800-Pound Gorilla
The No. 1 thing PayPal still has going for it is its business is massive. You would never guess the payments platform is still relevant today from news coverage, but data from Statista shows PayPal dominates the market. It commands a 45% share of online payment processing technologies worldwide, or more than the next 12 largest rivals combined!
The list also includes its own subsidiaries Venmo and Braintree, so PayPal’s share of the market is even bigger. Cumulative total payment volume jumped 13% in 2023 to $1.53 trillion as the number of payment transactions rose 12% to 25 billion. Transactions per active accounts increased 14% to 58.7.
Morning Consult says PayPal blows away the digital wallet competition as well with 71% U.S. adults — 185 million people — using PayPal.
Shopify’s (NYSE:SHOP) is second with 44% and Venmo is third at 39%. Obviously, people are using multiple platforms but PayPal’s consolidated totals show they gravitate toward it more than any other service. Other PayPal platforms include Xoom, Paidy, Zettle, Hyperwallet and Honey.
Importantly, 19% of PayPal users are 28 to 29 years old, 28% are 30 to 39, and 22% are 40 to 49. These are key demographics for future growth.
PYPL Stock in the Near Term
Admittedly, there are concerns. Although payment volumes are rising, the number of active accounts continues to drop. PayPal saw a 2% decrease in active accounts, falling to 426 million. What it means is there are somewhat fewer people using PayPal but using the service more often.
PayPal also warns not to get too excited about the coming year. CEO Alex Chriss says the fintech is putting the pieces into place “to position PayPal for long-term success.”
That includes firing about 9% of its workforce but also implementing new technologies, such as well as launching six new artificial intelligence enhancements to efficiently improve the checkout experience while also providing new discovery tools for merchants and consumers.
No one considers these trailblazing innovations. Rather they are necessary upgrades so that PayPal offers customers the same experience they can find elsewhere. These are incremental changes, not revolutionary ones.
Good News for PYPL Stock
That’s OK for patient investors. PYPL stock trades at 10 times earnings estimates, 15 times the free cash flow it produces and at a fraction of its projected long-term earnings growth rate. Its price-to-earnings ratio and price-to-sales are at unprecedented lows.
What you’re seeing is a heavily discounted stock that Wall Street has all but written off. That’s a mistake you can capitalize on. Analysts have a one-year consensus price target of $70 a share on PYPL stock, but also a hold rating indicating limited progress.
That may be correct, considering management talks about changes to come, but it means savvy investors should move now before the crowd catches on and jumps on board. PayPal remains a solid pick for investors and one that promises to reward them handsomely in the future.
On the date of publication, Rich Duprey did not hold (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.
