Replies to post #14564 on Keeping It Simple

[eastunder]

PayPal Making Promising Moves Under The Surface

https://seekingalpha.com/article/4640840-paypal-making-promising-moves-under-surface

Oct. 15, 2023 1:00 AM ET
Joshua Hall

Summary
PayPal Complete Payments is a standardized payment processing platform for SMBs, offering optimized checkout experiences and value-added services.
PayPal is gradually rolling out one-click buying for its 35 million merchants. This should lead to higher conversion rates for merchants.
PayPal is introducing new value-added services to incentivize guest checkout users to create PayPal accounts.
PayPal is notifying users of their pre-approved Buy-Now-Pay-Later amounts which should increase adoption of the service.

Focused on the Fundamentals

In a recent Management Meeting, PayPal (NASDAQ:PYPL) executives went into details on some key business initiatives that they are rolling out. I want to highlight a few of these as they look promising for future earnings growth. Before I get started on this, I want to provide some helpful background on the business.

The following slide outlines PayPal’s 3 core business segments and how they overlap as it services both sides of the customer/merchant relationship as well as the network that connects them:


PayPal June 2023 Management Meeting Presentation

Wallet and Commerce includes the PayPal and Venmo apps and all the services contained within them.

Payment Service Provider includes Braintree, PayPal Complete Payments [PCP], and Zettle. Braintree provides payment processing and related services to large enterprises, such as Uber. PCP is a standardized payment processing service for small and medium sized businesses (SMBs). It is a relatively new offering and will be a focus of this Letter. Zettle was acquired by PayPal in 2021. It is in-store payment processing platform that competes with Square.

Network is where consumers pay for products or services. PayPal’s strategy is to drive its branded checkout where consumers checkout with Pay with PayPal or Pay with Venmo (now an option on Amazon). These transactions are higher margin. The company is focused on making branded checkout as frictionless as possible and adding value added services.

Roughly 1/4 of all e-commerce transactions go through PayPal and 25% of all payment cards (credit, debit, etc.) in the Western world are held in a PayPal vault. Given its existing market share, the PayPal opportunity lies not so much with payment volume growth, although that will continue to grow, especially with higher inflation, but with potentially growing its take rate by driving more higher margin branded checkout. PayPal’s take rate is currently 2%. If it was able to grow this to 2.5% on its current expense base, then free cash flow would double and the stock price would triple or quadruple, all else being equal.

PayPal Complete Payments
PayPal Complete Payments, or PCP, is a standardized payment processing platform for SMBs. It will accept any payment method and, notably, always provides merchants with the most up-to-date, optimized checkout experience (which is primed to enable branded checkout). This is a serious competitive threat for the likes of Block and Stripe. One of the issues that PayPal has with its merchant customer base is that they are using a string of older legacy platforms. By converting SMBs to PCP, it will ensure they are always on the current platform which PayPal can continually optimize for better customer experiences.

90% of PayPal's Braintree business comes from large enterprises. Management is focused on leveraging PCP within its Braintree business to sell its payment process capabilities to higher margin SMBs. In a recent conference, Acting CFO Gabrielle Rabinovitch, described this opportunity as follows:

In addition, we talked about PPCP [PCP], which really is bringing a full stack processing capabilities in a full-stack platform to SMBs. We've never been in this market. We've never had a product to compete in this market, and this is amazing white space for us when we think about what we can do for SMBs.

SMBs – the PayPal brand to Checkout button is sort of an essential need for most SMBs. And so we bring real conversion and real lift to their business. The ability now to offer sort of the stack that can give them everything they need with one partner, we think, will be very, very compelling. And that, of course, has a much higher margin profile than what we would have on the LE side.

PayPal's success or lack thereof with this move will be an important area of focus as we get more incoming data in the upcoming quarterly results.

In both PCP and Braintree, PayPal is looking to expand internationally, where margins are higher, and offer value-added services such as those depicted on the following slide:


PayPal June 2023 Management Meeting Presentation

In some of these categories, such as In Store, Risk as a Service, and FX as a Service, PayPal has minimal market share penetration. The cross-selling of these additional services enables the sale of deeper, end-to-end solutions which are higher margin.

One-click Buying

PayPal is gradually rolling out one-click buying for its 35 million merchants. The idea is that consumers will be able to check out with one-click when shopping with any one of these 35 million merchants. The way it works is your payment information is saved to a network vault so that the next time you go to pay you don’t have to set up or edit anything. This eliminates the issue of stale payment information stored with each individual site. The selling point for merchants is that there is a 90% conversion rate when consumers select PayPal versus only 50% to 60% for guest checkout.

There are about 1 billion users of guest checkout today. PayPal is looking to drive more of these consumers to create PayPal accounts by making value-added services available to them through their merchants if they do so. Here is how Chief Product Officer, John Kim, described some of these:

Let me show you some examples of things that we would do to drive users into becoming PayPal users. One example is package tracking. The value from the consumer is they get to track their packages from order all the way through delivery.

For the merchant, it does 2 things. One is that we've reduced the number of contacts for where is my package; and number 2 is we actually decreased the chargebacks related to non-delivered items. So whether they are a PayPal customer or a non-PayPal customer, we get to offer value added features and make it all available through the PayPal app.

A second example is smart receipts. With smart receipts, we're going to detail the items that are purchased, and then consumers can save these receipts to their PayPal Wallet for easy discovery, to track their history, to manage all of their finances. And within the wallet, what we'll do is we'll provide a surface. So it's very easy for merchants to cross-sell and upsell, giving merchants an ability to double the value of every given transaction, again changing the economics of using PayPal.

Given the scale at play here, it will be interesting to see how this change affects user adoption.

These additional service offerings are important to consumers because they increase convenience and peace of mind, especially when it comes to Buy Now Pay Later.

Buy Now Pay Later
PayPal is a leader in Buy Now Pay Later (BNPL), has an 81.6 Net Promoter Score (which is apparently very high and the highest in the industry), and was ranked #1 by Consumer Reports. This article details some of the issues that consumers have with this new service that competes with credit cards. Consumers will stop using these services if they run into major hassles. PayPal is not squeaky clean here but its focus on frictionless, security transactions should enable it to continue to stand out.

Management understands this so they are introducing enhancements. Notably, when it comes to BNPL, they are proactively communicating to 110 million users over the coming months what their pre-approved spending limits are, as the following slide outlines:



PayPal June 2023 Management Meeting Presentation

This will not only make millions of users aware that this service is even available, but it may encourage increased use of Pay with PayPal in general. [Note: I recently used this service myself after PayPal made it clear what my pre-approved amount was. It worked great and I will likely use this again in the future.]

This rollout is part of a greater effort by the company to deal with customer pain points when it comes to using BNPL services.

What I like about the direction of PayPal’s BNPL strategy is that it is not looking to take on the credit risk. It is looking to earn a fee on the transaction (merchants pay when customers use it) and then sell the short-term loan book to investment firms such as KKR.

Valuation
Over the long-term, I'm making the following key assumptions in my financial model for PayPal:

12% Total Payment Volume (TPV) growth

A gradual decline in the take rate by roughly 3 basis points per year

7% annual growth in costs and expenses

This would lead to operating margins climbing into the high-teens/low 20% range. Assuming the company devotes 80% of free cash flow to share repurchases going forward, this trajectory could have the company generating $10 of free cash flow per share in 3 years.

These assumptions could be conservative considering that TPV growth has averaged almost 24% annually over the last 8 years. Moreover, the fundamentals highlighted in this article could stabilize or even grow the take rate.

Here is the monthly log chart:


Courtesy of Barchart

My 12-month target price is $84 which 14 times the $6 of FCF per share that I think the company can generate in 2024. This is roughly the middle of this monthly trend channel.

The Key Risk
The key and immediate risk to the short-term performance of the stock is a faster decline in the transaction take rate due to lower margin large enterprises continuing to dominate its Payment Service Provider (PSP) business. This is why management's strategic focus on selling PayPal Complete Payments (PCP) to small businesses, international expansion, and valued-added services is so critical here. These are all higher margin transactions.

Strategic Conclusion
I like the "focus on fundamentals" direction that management has been steering the business in. PayPal continues to be one of my largest positions. The stock is trading for less than 10 times my 2024 free cash flow per share estimate and I see 45% upside over the next 12 months.

The stock looks like it is potentially putting in a significant long-term bottom and the details of this article have me suspecting that this will lead to earnings results that outperform over the coming quarters.

[eastunder]

PYPL

Cpps @ 55.75

Earnings 11-1 A

CP: 1050, 450, 525, 650, 125 
    1450, 225, 375, 525, 600, 600, 225 
    (6800) 
  
 SB: 50,50,25,50,25 
     50,25,25,25,-,-,25 
     (300) 
  
 TB: 450, 550, 475, 350, 125 
     50, 275, 125, 475, 400, 400, 275 
  
 TP: 1.5, 1, 1, 1, 250 
     1.5, .5, .5, 1, 1, 1, .5 

[eastunder]

10/29 OS

PYPL



ROKU



TWLO



ZM

[eastunder]

PayPal raises full-year profit forecast above Wall Street estimates
4:15 PM ET, 11/01/2023 - Reuters
Nov 1 (Reuters) - PayPal Holdings raised its forecast for full-year adjusted profit above Wall Street estimates on Wednesday, as the payments giant banks on resilient consumer spending trends during the key holiday shopping season.

Consumer spending has shown remarkable strength this year, with analysts expecting the cheer to extend to the holidays, as companies dangle steep discounts on everything from electronics to clothing to entice inflation-weary shoppers.

Online sales during the U.S. holiday season, which includes some of the biggest shopping days such as Cyber Monday, Thanksgiving and Black Friday, are expected to rise 4.8% from a year earlier, a report from Adobe Analytics showed in October.

The company said it expects adjusted profit for the full-year to be about $4.98 per share from $4.95 earlier. Analysts on average had expected $4.92, according to LSEG data.

Analysts, however, remain focused on PayPal's margins that have underwhelmed investors in recent quarters. The company's low-margin business products have grown strongly, while growth in its branded products has slowed due to increased pressure from competitors such as Apple.

PayPal cut its annual forecast of adjusted operating margin expansion to 75 basis points from 100 basis points expected earlier. Adjusted operating margin was 22.2% in the third quarter.

PayPal's revenue jumped 9% to $7.4 billion on FX-neutral basis in the third quarter ended Sept. 30. Analysts on average had expected $7.38 billion.

U.S. consumer spending surged in September as households boosted purchases of motor vehicles and traveled, keeping spending on a higher growth path heading into the fourth quarter, according to data from the U.S. Commerce Department.

Total payments volume increased 13% on FX-neutral basis to $387.7 billion in the third quarter, beating Street expectations of $377.9 billion.

The firm earned $1.30 per share on an adjusted basis in the third-quarter, beating Wall Street expectations of $1.23 per share. (Reporting by Manya Saini in Bengaluru; Editing by Krishna Chandra Eluri)

[eastunder]

PYPL Targets after earnings
All targets cut with lowest and highest targets marked

TD Cowen Adjusts PayPal Price Target to $62 From $66, Maintains Market Perform Rating

Citigroup Adjusts PayPal Price Target to $84 From $93, Maintains Buy Rating

JPMorgan Cuts PayPal Price Target to $80 From $100, Maintains Overweight Rating

Piper Sandler Trims PayPal Price Target to $66 From $67, Maintains Neutral Rating

Goldman Sachs Adjusts PayPal Price Target to $80 From $89, Maintains Buy Rating

Morgan Stanley Cuts Price Target on PayPal to $118 From $126, Keeps Overweight Rating

Canaccord Genuity Adjusts Price Target on PayPal to $100 From $110, Keeps Buy Rating

BMO Capital Adjusts PayPal Price Target to $90 From $100, Maintains Outperform Rating

JMP Securities Adjusts PayPal Price Target to $68 From $85, Maintains Market Outperform Rating

RBC Cuts Price Target on PayPal Holdings to $70 From $86, Keeps Outperform Rating

[eastunder]

PayPal Stock: Time To Load Up

https://seekingalpha.com/article/4651320-paypal-stock-time-to-load-up
Nov. 14, 2023 7:30 AM
Dair Sansyzbayev

Summary
PayPal Holdings, Inc. stock price has declined by 11% in the last quarter, which provides even better buying opportunities.

The company has several strong competitive advantages, which will highly likely allow the company to build more value for shareholders.

My valuation analysis suggests the stock is more than two times undervalued.



Investment thesis

My initial bullish thesis about PayPal Holdings, Inc. (NASDAQ:PYPL) did not age well since the stock price declined by 11% over the last quarter, which is underperformance compared to the broader U.S. market. Investor sentiment deteriorated mainly due to profitability metrics compression, which indicates that the company is losing its competitive edge to bears. However, revenue is still growing even in this harsh environment, and the management appears focused on delivering profitable growth. I consider the management's target to achieve high-quality growth to be doable given the company's strong reputation and global presence.

PayPal is also well positioned to leverage its data wealth amid the secular shift to machine learning to improve decision-making. My valuation analysis suggests the stock has the potential to double in price, which by far outweighs all the risks and uncertainties. That said, I reiterate my "Strong Buy" rating for PayPal.

Recent developments

The latest quarterly earnings were released on November 1, when the company topped consensus estimates. Revenue grew YoY by an impressive 8.4%. Despite revenue growth, profitability metrics narrowed. The operating margin shrank YoY from 17.1% to 16.0%.



According to the latest earnings call transcript, there were several unfavorable factors that weighed on the profitability. The management cited challenges in achieving the expected growth in its branded checkout services, with a notable deceleration after an initial rapid acceleration. The softening dynamics in branded checkout growth likely contributed to a decline in the transaction revenue. Pressures on the take rate for branded checkout also undermined profitability. Transaction margin compression also took place, according to the management. To me, from the secular standpoint, pressure on the company's operating profits is an indication of the intensifying competition. On the other hand, the company's capacity to deliver volume growth reflects its strong positioning among competitors and adaptability to the changing landscape.

But despite profitability demonstrating strength, PYPL's profitability is still very strong and has an "A-" grade from Seeking Alpha Quant. Wide profitability metrics allowed PYPL to generate over $2 billion in levered free cash flow [FCF] during Q3. This allowed the company to improve its financial position, as the company now has $11.6 billion in cash and cash equivalents. The leverage level is moderate, and the major part of the debt is long term. All in all, the company's balance sheet is strong and provides the company with opportunities to finance innovation and growth.



The upcoming quarter's earnings are scheduled for release on February 1. Quarterly revenue is expected by consensus at $7.87 billion, which means almost a 6.6% YoY growth. The adjusted EPS is expected to follow the top line and expand from $1.24 to $1.37.



Despite the bottom line challenges PayPal is facing, I am still confident in the company's future prospects. The company's data and scale are formidable assets as we are amid the beginning of the artificial intelligence [AI] era. As the digital payments industry becomes more complex and competitive, the integration of AI becomes crucial in the company's strategy. PayPal's wealth of data equips the company to unlock vast AI and data-driven capabilities, which is highly likely to provide the company with a competitive edge. I like that management recognizes these trends and is ready to invest in innovation to keep up with the evolving technological landscape and build shareholder value.

Apart from being well positioned to compete and innovate from the technological perspective, let us also not forget the company's massive scale. According to marketsplash.com, PayPal is accepted in over 200 countries worldwide, and among the top 1,000 retailers, a staggering 72% accept PayPal. The extensive reach reflects the company's adaptability to diverse markets and underlines its trustworthiness. Having a strong reputation and presence is crucial in an industry that processes customers' money.

The management's focus on high-quality and profitable revenue growth, highlighted during the latest earnings call, also adds optimism to me. As the management sharpens its focus on the sustainability of growth, it will likely add a sense of stability and resilience for investors. The decision to sell Happy Returns to UPS aligns with the management's plans to focus on more profitable activities and also looks consistent to me.

According to statista.com, the total global digital payments transaction value is expected to compound by 11.8% annually by 2027. I consider this a solid secular tailwind. As a strong player in the global digital payments ecosystem, PayPal is well-positioned to succeed in absorbing industry tailwinds.

Valuation update

The stock price declined by 27% year-to-date, significantly underperforming the broader U.S. market. Current valuation ratios are multiple times lower than historical averages across the board, which indicates substantial undervaluation. I ignore comparison with the sector median because of PayPal's massive scale and strong brand, which apparently deserves a premium compared to industry peers.



I also want to update my discounted cash flow [DCF] simulation. The TTM FCF ex-stock-based compensation [ex-SBC] margin improved to 10.7%, which I incorporated into my base year. I expect the metric to expand by 50 basis points yearly. Given the Fed's hawkish stance this time, I prefer to use a more conservative 12% WACC compared to the 10% the previous time. Revenue consensus estimates forecast an 8% CAGR for the next decade, which I consider fair enough to use for my simulation.



According to my calculations, the business's fair value is approximately $125 billion. That said, there is an above 100% upside potential, and my target price is $116.

Risks update
The most significant company-specific risk that I see is the leadership transition in the company. Dan Schulman, who has been PYPL's CEO since 2014, is expected to retire at the end of 2023. While the new leader might add fresh ideas and growth drivers, the transition of the CEO is always a risk as it increases the level of uncertainty regarding the company's strategic priorities and initiatives.

The digital payments industry is becoming more competitive as many tech giants like Apple (AAPL), Google (GOOG), and Meta Platforms (META) enter the market with their offerings. Global digital payments leaders like Visa (V) and Mastercard (MA) are also very strong competitors. The ability of PayPal to differentiate itself and maintain its market share amid such intense competition is a significant risk for investors.

Bottom line
To conclude, PayPal is still a "Strong Buy" for me. Given fairly conservative assumptions, the stock is massively undervalued, and I see more than a 100% upside potential. My analysis suggests that PayPal is well-equipped to be competitive, even given that hyper scalers like Apple and Google are also expanding to the digital payments field. The company's strong brand and trustworthiness among the largest merchants are also formidable assets.

[eastunder]

PYPL reporting After close

cpps 63.63

[eastunder]

PYPL analyst Ratings



High and low marked

RBC Raises Price Target on PayPal Holdings to $74 From $70, Keeps Outperform Rating

Morgan Stanley Cuts Price Target on PayPal Holdings to $62 From $66, Notes Outlook 'Meaningfully Worse Than Most' Expected; Equalweight Kept

TD Cowen Cuts PayPal Price Target to $58 From $64, Maintains Market Perform Rating

Goldman Sachs Adjusts PayPal Price Target to $74 From $80, Maintains Buy Rating

JPMorgan Trims Price Target on PayPal to $70 From $75, Maintains Overweight Rating

Baird Lowers Price Target on PayPal to $70 From $75, Maintains Outperform Rating

BMO Capital Cuts Price Target on PayPal to $60 From $65, Maintains Market Perform Rating

Evercore ISI Cuts Price Target on PayPal to $56 From $65, Maintains In Line Rating

Citigroup Cuts Price Target on PayPal to $73 From $76, Maintains Buy Rating

[eastunder]

PayPal's turnaround timeline catches investors off guard as company sees no FY24 EPS growth

12:47 PM ET, 02/08/2024 - Briefing.com

Rising competition in the payments space has taken a toll on fintech pioneer PayPal (PYPL), which has seen its revenue growth shrink to single digit levels in recent quarters as it loses share to companies like Apple (AAPL), Google (GOOG), and Affirm (AFRM). As such, expectations were muted heading into PYPL's Q4 earnings report with market participants focusing their attention on the future, looking for evidence that the turnaround plan from recently appointed CEO Alex Chriss is starting to take hold.

While PYPL comfortably exceeded those Q4 expectations with both EPS and revenue topping estimates, its weak guidance for FY24 indicated that a turnaround is going to take longer than anticipated. Specifically, the company said that it expects FY24 EPS to be about flat with FY23 at $5.10, falling well short of analysts' forecasts.

This discouraging guidance caught investors off-guard, especially after PYPL announced a 9% workforce reduction in late January. Costs, though, do not seem to be the issue. In fact, in Q4, total operating expenses were up by just 3% yr/yr to $6.3 bln. Rather, the main problem for PYPL is that its payment platform has fallen behind the curve, losing traction with consumers and businesses.

This is most clearly seen in the drop-off of branded transactions which are generated when consumers use the PayPal or Venmo app. These transactions are far more lucrative than unbranded transactions, or transactions that PYPL executes for businesses. A key metric that reflects this challenge is transaction margin dollars.

In Q4, transaction margin dollars were flat on a yr/yr basis at $3.7 bln and PYPL doesn't see this improving much in FY24. During the earnings call, the company said that it expects transaction margin dollars to remain flat this year on a yr/yr basis. Adding salt to the wound, Mr. Chriss acknowledged that the product improvement initiatives he highlighted during his "First Look" presentation on January 25 are not likely to move the needle much in FY24.

According to Mr. Chriss, the initial customer reaction to these product enhancements, including a faster checkout experience and an AI-powered recommendation tool called Smart Receipts, has been encouraging, but it will take time for them to contribute meaningfully to the financials.

The main takeaway is that PYPL's disappointing FY24 guidance offered a sobering reality check that there is no quick fix to the company's turnaround. Keeping a tight lid on costs and enhancing the platform's capabilities is a sound strategy, but the stock seems likely to be stuck in neutral until some tangible evidence emerges that stronger growth lies ahead.

[eastunder]

PYPL Stock Forecast: A PayPal Turnaround IS Coming. Just Not This Year.

PYPL just revealed things are going to take a bit longer than expected

By Rich Duprey, InvestorPlace Contributor

https://investorplace.com/2024/02/pypl-stock-forecast-a-paypal-turnaround-is-coming-just-not-this-year/

PayPal Holdings (PYPL) issued a solid earnings report but offered weaker-than-expected guidance.

While transaction volumes were higher, the payments platform continued to lose active users.

New investments in AI, payment service provision and a cash app debit card could lift the stock going forward.

What have you done for me lately? That’s the approach this PayPal Holdings (NASDAQ:PYPL) stock forecast will consider. The payments platform that just reported fourth-quarter earnings and saw its stock tank after hours. Despite a solid beat on revenue and earnings, the market sold off shares because of soft guidance and a decline in active accounts.

The ailing fintech stock was barely keeping its head above water but is now at a loss for the year. Is it really going to be another dismal year for PayPal investors after the 20% loss or so in 2023? Or does a PYPL stock forecast indicate now is the time to buy in for the coming rebound?

Weakness in the PYPL Stock Forecast

Investors are going to need to more patience for PayPal’s turnaround to happen. Management is putting the pieces in place to engineer a return to growth. It’s just taking longer than expected for it to gain traction.

PayPal saw total volumes rise 15% from last year to $410 million with transactions up 13%. Payment transactions per active account also rose 14% on a trailing 12-month basis. Yet the number of active accounts declined 2% to 426 million. Essentially PayPal is getting users to do more with its service though it has less of them.

That led revenue to rise 9% to $8 billion handily, topping consensus estimates of $7.87 million. Adjusted earnings jumped 19%, rising to $1.48 per share, also beating Wall Street forecasts of $1.36 per share.

PayPal recently announced it was firing 9% of its workforce to help contain costs. The management plans to invest in other areas to help ignite growth. It’s good that PayPal is looking down the road instead of trying to please Wall Street here and now, but it means the turnaround is more difficult than believed and will take time to achieve.

Jumping on the AI bandwagon

PayPal continues to explore new opportunities. Last month it launched six new artificial intelligence (AI) enhancements to efficiently improve the checkout experience while also providing new discovery tools for merchants and consumers.

Although they appear derivative of what you can find elsewhere, it may help bring users back for more. Think of it as a necessary progression instead of a trailblazing development.

The payments platform is also investing more in Braintree, PayPal’s payments service provider. PSPs manage online payments for merchants, moving the money from the customer through the bank and into the business’s account.

Braintree authorization rates improved 240 basis points in Q4 and PayPal says it gained market share and greater merchant approval. Much of the transaction growth PayPal saw in the quarter was because of Braintree.

It is also expanding the reach with its Venmo cash app with the launch of a Venmo debit card. It notes cardholders are among its most-engaged users, with 6% of active Venmo users having a card. That suggests there is plenty of room for greater adoption.

Patience with PYPL

So should an investor buy now? PYPL stock looks undervalued. It trades at just 19 times earnings and 10 times estimates. PayPal has never traded at such low valuations in its entire time as a publicly traded company. The same goes for its price-to-sales ratio. It’s as low as it’s ever been.

Competition is fierce in payments, which pressures margins, but PayPal possesses a large platform trusted by both merchants and consumers. Unfortunately, it’s fairly limited to the e-commerce space which narrows its field of opportunity.

That’s why both Venmo and Braintree are where its growth potential lies. The launch of AI tools also bodes well for the future, even if they’re not any groundbreaking tools. It shows PayPal can adapt to new models. But I’ll take management at its word that we’re not likely to see much of a turnaround this year before things improve in 2025.

That’s why an investor could buy in now. Rarely does someone pick the perfect entry point and with the stock at a decent valuation and potential growth to come, picking up shares now and holding for the long term makes the most sense.

[eastunder]

Analysts reveal PayPal stock price targets after earnings

Rob Lenihan
Fri, February 9, 2024 at 10:55 AM MST·4 min read

https://finance.yahoo.com/m/818b5ca9-6a36-36ba-a484-0f86d21f7b7e/analysts-reveal-paypal-stock.html

On Jan. 17 Alex Chriss made a bold promise.

Appearing on CNBC, Chriss, who recently took over as PayPal's (PYPL) president and chief executive, addressed the less-than-stellar comments the online payments company had been receiving from a number of Wall Street analysts.

"To be honest, there hasn't been a lot to celebrate over the last few years," Chriss said. "I love being the underdog. I'll take that feedback, and we'll shock the world."

Shocking the world is a big statement in the financial sector, even for a venerable internet company like PayPal, which got started in 1998.

Elon Musk was involved in the company's creation when the future Tesla (TSLA) CEO co-founded the online banking service X.com, which later merged with Cofinity to form PayPal.

(Musk would go on to buy Twitter and change its name to X, but that's another story.)

Meanwhile, PayPal was sold to eBay (EBAY) in 2002. Twelve years later, the online auction site said it would spin off PayPal into a separate company.

Dan Schulman was the company’s president and CEO from 2015 to 2023. In August, PayPal said that Criss, a senior Intuit executive, would take over.

And on Jan. 25, the new CEO unveiled PayPal's "next chapter," which would expand the company's use of artificial intelligence to provide such features as a faster checkout experience and AI-personalized merchant recommendations for customers.

PayPal's guidance falls short

Real Money Prso contributor Ed Ponsi noted that while PayPal introduced new tools for merchants and customers to leverage AI capabilities, "rival companies will certainly do the same in the future."

"The online commerce pioneer is besieged by competitors such as Alphabet’s Google Wallet and Apple Pay," he said. "Elon Musk’s X will likely join the fray, perhaps offering online payments and other financial services before the end of this year."

Five days later, PayPal, which also owns Venmo and Braintree, said it would cut 9% of its global workforce, about 2,500 jobs.

"We are doing this to right-size our business, allowing us to move with the speed needed to deliver for our customers and drive profitable growth," Chriss said in a statement.

On Feb. 7, the company reported fourth-quarter earnings of $1.48 a share, beating the FactSet analyst consensus of $1.36.

Revenue totaled $8.03 billion, beating Wall Street’s call for $7.87 billion. A year earlier, PayPal posted earnings of $1.24 a share on $7.38 billion of revenue.

However, PayPal's guidance for the first quarter and full year fell short of expectations.

The company expects full-year earnings of $5.10 per share, missing the $5.48 target that analysts expected.

PayPal estimated first-quarter year-over-year earnings per share growth would fall in the mid-single-digit percent range, compared with the consensus estimate of 8.7%.

During the company's earnings call, Chriss told analysts, "2024 is going to be a transition year, focused on execution to position the business for long-term success."

"Our clear goal is to reshape the company to accelerate profitable growth and margin expansion in the years ahead," he said, according to a transcript of the call.

Analyst: 'Franchise remains strong'

After the earnings were released, several Wall Street analysts cut their price targets on PayPal but still supported the company's turnaround efforts.

Canaccord lowered its price target on PayPal to $80 from $100 and affirmed a buy rating on the shares.

The firm said that the core PayPal franchise remained strong and growing, and with a renewed focus on the core PayPal value proposition, the analysts expected to see results begin to emerge exiting 2024.

Truist lowered its price target on PayPal to $70 from $73 but reiterated a buy rating on the shares.

The firm said the stock-price decline stemmed from PayPal's 2024 guidance, but this will ultimately "shake weak hands," Truist told investors in a research note.

PayPal's key metrics are "bottoming" while its turnaround gets underway, the firm said.

Piper Sandler lowered PayPal's price tag to $62 from $66 and maintained a neutral rating on the shares.

The firm said that PayPal's operations beat estimates this quarter as payment volume and the transaction take rate exceeded its expectations.

Total Payment Volume, which measures the gross value of payments successfully processed through a payments platform over a given period, grew 15% and was driven by continued momentum internationally and within the unbranded product.

Piper Sandler said guidance for minimal earnings growth in 2024 implies earnings-per-share estimates need to decline about 7% as headwinds against revenue growth emerge in the first quarter.
****************************************************************


PYPL 58.91

[eastunder]

Is Paypal Stock Going to $75? 1 Wall Street Analyst Thinks So.

Eric Volkman, The Motley Fool
Sun, February 18, 2024 at 6:05 AM MST·2 min read

https://finance.yahoo.com/m/64298f85-d084-3c6b-a05e-a11f7bfbdb1a/is-paypal-stock-going-to-%2475%3F.html

Anyone interested in locking down a short-term investment return approaching 30% would do well to plonk down some money on Paypal (NASDAQ: PYPL) stock.

That's if you believe one analyst who reduced his price target for the company even though he's still bullish on the stock overall. Let's explore what's going on here.

Not exactly a deep cut

On Tuesday, Paul Golding of Macquarie shaved $2 from his Paypal price target, bringing it down slightly to $75. That's still 26% higher than where the stock trades as of this writing, so Golding continues to believe it has much potential. Despite the haircut, Golding firmly maintained his recommendation of outperform (or buy) on the fintech stock.

Paypal grew to prominence when it was owned and operated by e-commerce veteran eBay. Interestingly, as eBay has faded somewhat in prominence over the years, PayPal has risen as a major player in the next-generation payments world.

Golding's slight price cut was due to what he termed management's "muted outlook" for the company's all-important transaction margins for the rest of this year. Yet the analyst is clearly encouraged by Paypal's numerous current and potential revenue streams.

Paypal bulls aren't hard to find

For the most part, recent analyst takes on Paypal are neutral to favorable. That "muted" quality Golding wrote about could be reflected in per-share earnings, which in the consensus analyst view are expected to dip slightly this fiscal year compared to 2023. Growth should pick up in fiscal 2025, though, with an expected year-over-year rise of almost 10%.

Those analysts are expecting a smoother upward ride with revenue. Collectively, they're modeling nearly 7% top-line growth for this fiscal year, bumping a bit higher to almost 8% in the next one.

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PYPL cpps 58.78



Tap to Pay on iPhone Now Available for Venmo and PayPal Zettle Businesses in the U.S.
https://www.prnewswire.com/news-releases/tap-to-pay-on-iphone-now-available-for-venmo-and-paypal-zettle-businesses-in-the-us-302082615.html

PayPal Holdings, Inc.
07 Mar, 2024, 10:00 ET

Tap to Pay on iPhone is now live for all Venmo business profile and PayPal Zettle users in the U.S.

SAN JOSE, Calif., March 7, 2024 /PRNewswire/ -- PayPal Holdings, Inc. (NASDAQ: PYPL) today announced that Tap to Pay on iPhone is now available for all Venmo business profile and PayPal Zettle users in the U.S., enabling them to accept contactless card and digital wallet payments directly on their iPhones with no additional cost or hardware. This is the latest development in PayPal's ongoing efforts to help small businesses sell more, grow their business, and manage their finances more efficiently.

Consumers are increasingly going cashless. More than 40 percent of Americans surveyed say that none of their purchases are made with cash in a typical week, and that trend is expected to continue. As a result, accepting card and digital wallet payments in person is increasingly table stakes for small businesses, but until recently, businesses have had to purchase and manage card readers to do so. With Tap to Pay on iPhone, PayPal is helping millions of small businesses adapt to this shift in consumer behavior in a fast, easy, and more affordable way.

"As consumers increasingly turn to non-cash options to pay, small businesses are looking for affordable and flexible ways to offer their customers more payment choice without being tied down to a fixed location," said Nitin Prabhu, VP, Small Business & Financial Services, PayPal. "With Tap to Pay on iPhone, millions of small businesses that use Venmo and PayPal Zettle can now start accepting contactless card and digital wallet payments nearly anywhere, directly on their iPhones, which can expand their customer base and drive incremental sales."

With Tap to Pay on iPhone, Venmo business profile and PayPal Zettle users in the U.S. can get set up in minutes and begin securely accepting contactless cards and digital wallets directly on their iPhones. They can also add taxes, accept tips, send receipts, and issue refunds. In addition, funds from sales will settle quickly into a business's Venmo or PayPal Zettle account, helping to streamline operations and manage cash flow.

Tap to Pay on iPhone will also enable Venmo business profile users to dramatically expand their customer base and accept payments from buyers even if the buyer doesn't have a Venmo account. They can also manage both their Venmo and card payment transactions directly within the Venmo app.

Venmo business profile and PayPal Zettle users like Saint Paul Spice Company and The Cheesecake Queen are already seeing success with Tap to Pay on iPhone.

"Enabling Tap to Pay on iPhone with our Venmo business profile was really easy, and my customers really love it because it's a quick and convenient way for them to pay," said Elaine Bailey, founder of The Cheesecake Queen based in Houston, Texas. "It's especially handy when I have a long line of customers and need to get payments processed quickly. The solution has made it so fast and simple to accept payments when I'm selling at popups and festivals, especially because a lot of my customers don't want to carry cash, and prefer to pay with a digital wallet like Venmo or with cards. My customers are actually amazed at the Tap to Pay on iPhone option provided through Venmo, it's by far the smoothest, easiest transaction method I've ever used!"

Small business owners can get set up in just a few simple steps and start accepting contactless cards and digital wallets through their Venmo business profile or through PayPal Zettle.*

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PYPL

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PayPal: The Cheapest, Highest-Quality Tech Stock to Buy in 2024
Darren Samson, The Motley Fool
Mon, Mar 25, 2024, 1:28 PM MDT5 min read

https://finance.yahoo.com/news/paypal-cheapest-highest-quality-tech-192800253.html


Nearly 25 years ago, Elon Musk and Peter Thiel disrupted the world with digital payments company PayPal (NASDAQ: PYPL). Today, it remains the strongest competitor in a fast-moving industry, and it is by far the cheapest, highest-quality tech stock you can buy in 2024.

The core of PayPal's business comes from the merchants who accept it as a form of payment and the customers who rely on it to pay their bills.

For merchants, the main value of accepting PayPal is it gives a customer the flexibility to pay with their credit/debit card, Venmo, or even competing digital wallets. This reduces friction and makes it easier (and therefore more likely) for a transaction to occur.

For customers, the biggest benefit is privacy and security. PayPal customers can buy something without sharing their financial information with the merchant.

PayPal's simplicity and security has created widespread brand awareness among people of all ages.

Steady annual revenue growth

Today, PayPal has 391 million consumer accounts and 35 million merchant accounts, but its most important metric is total payment volume (TPV), which rose 13% in 2023 to $1.53 trillion. It is the single biggest driver of the company's revenue.

Overall, PayPal's net revenue increased 8% in 2022 and 2023, and there's good reason to think it will grow by a consistent 8%-plus annually for years to come.

Although this company is no longer the rapidly expanding Silicon Valley start-up it once was, it's still providing solid revenue and payment volume growth 25 years later, and there are three main reasons this should continue.

First-mover advantage

First, PayPal's massive size gives it a moat in the competitive digital payments industry. It was the first mover and operates in 200 countries and territories around the world. For a competitor to take away market share, it has to have a much better value proposition for someone to stop using their PayPal account.

The more customers who use PayPal, the more merchants will accept it as payment. This will keep total payment volume growing for years to come.

Widespread reach

Second, PayPal isn't just a high-value, well-known global brand. The company also owns brands including Venmo, Braintree, HyperWallet, and Xoom.

Venmo is one of the most popular digital payment apps. Over 78 million people use it, mostly in the United States, and Venmo's revenue doubled from 2020 to 2022. Braintree helps merchants accept both PayPal and credit cards with a single integration. HyperWallet makes global payments quick and simple, and Xoom lets people transfer money.

Whenever someone makes a purchase using any of PayPal's brands, the company receives a portion of the amount. It's a lucrative business to be in, especially when TPV is rising consistently like PayPal's is.

A government-backed moat

Finally, PayPal's moat extends beyond its size and well-known brands. Because the industry is so regulated, that makes it extremely difficult for new competitors to enter. PayPal's government licenses allow it to operate, and a competitor can't simply join the industry without government approval.

The company owns licenses in the U.S. to operate as a money transmitter, and in the state of New York it holds a full BitLicense issued by the New York Department of Financial Services to offer cryptocurrency services. These licenses extend to its other brands.

PayPal has a consistently growing business, as well as a clear path to staying ahead of the competition, but we haven't reached my biggest reason to be bullish...

The cheapest, highest-quality tech stock today

PayPal is a tech stock in the digital payments space, but its valuation is closer to a bargain value stock.

As I'm writing, its price-to-sales ratio (P/S) is just 2.16, which means investors are paying $2.16 for every dollar of the company's sales.

In June 2021, the P/S was nearly 15! This stock is cheap compared to its historical average, and cheap compared to its competitors, too.

Global Payments is a digital payments company and member of the S&P 500 and Fortune 500. Its P/S is 3.52 today, roughly 63% more expensive than PayPal.

Block, which owns CashApp and Square, has a P/S of 2.29 -- just a little more than PayPal.

Buy and hold

PayPal's ubiquity has made it one of the world's most well-known brands among nearly every demographic, and its size and scale are fueling its next evolution of growth.

The new era of cryptocurrencies has made digital payment software even more important, and PayPal is in a perfect position to capitalize.

The stock's 2.16 P/S makes it the cheapest, highest-quality tech company in the market today. PayPal probably won't trade at a discount for long, because its Venmo subsidiary and its government licenses ensure years of steady growth.

This is the type of stock you can buy and hold for years.

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PYPL 66.86

Pivot 68.21 on 54 day consolidation
82-85 profit range

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PayPal Earnings Pop 27% Under New Reporting Method. PayPal Stock Is Set To Break Out.
FacebookTwitterLinkedInShare Licensing
REINHARDT KRAUSE08:05 AM ET 04/30/2024

PayPal Holdings (PYPL) early Tuesday reported first-quarter earnings that rose 27% from a year earlier under a new accounting methodology while revenue and total payment volume for PayPal stock topped views. PYPL stock rose on the news, signaling a move past a buy point.

The digital payments firm reported earnings before the market open, not after the close as usual.

The new accounting includes the impact of stock-based compensation expense and related employer payroll taxes. PayPal said it has recast adjusted financial results for 2023, 2022 and 2021 to reflect the accounting change.

PayPal earnings for the March quarter rose 27% to $1.08 per share on an adjusted basis. Revenue climbed 9% to $7.7 billion.

Analysts polled by FactSet expected PayPal earnings of $1.22 a share on revenue of $7.515 billion. A year earlier, PayPal earned $1.17 a share on sales of $7.04 billion.

Payment Volume Beats

Total payment volume processed from merchant customers in the quarter climbed 14% to $403.9 billion. Analysts had projected total payment volume of $393.64 billion.

New CEO Alex Chriss took the helm in late September. Also, PayPal has named a new chief financial officer: Jamie Miller, formerly CFO at consultancy EY.

San Jose, Calif.-based PayPal has evolved from an online checkout site to a mobile shopping and person-to-person payments site. Meanwhile, competition has heated up with Apple (AAPL), Square-parent Block (SQ) and others.

PayPal Stock 2024 Guidance

On the stock market today, PayPal stock popped 8.2% to 72.50 in early trading. That's set to clear a 68.21 buy point from a consolidation going back three months.

PayPal also updated 2024 guidance. The company forecast adjusted EPS growth of "mid to high single-digit percentage" from $3.83 in the prior year based on the new reporting method. The 2024 guidance includes Q1 restructuring charges of $175 million and an estimated $70 million to $90 million in Q2.

Heading into the PayPal earnings report, shares were up 9% in 2024 but down 12% over the past year.

SQ stock rose slightly, nearing its 50-day line. Square-parent Block is set to report on Thursday.

PayPal said it announced plans to change accounting methods on Feb. 7

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PYPL 68.25 cpps

RBC Capital Raises PayPal's Price Target to $84 From $74

Susquehanna Adjusts PayPal Holdings' Price Target to $71 From $65, Keeps Neutral Rating

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PYPL Analyst Targets

Susquehanna Adjusts PayPal Holdings' Price Target to $71 From $65, Keeps Neutral Rating

RBC Capital Raises PayPal's Price Target to $84 From $74

Mizuho Adjusts Price Target on PayPal Holdings to $68 From $60

Morgan Stanley Raises Price Target on PayPal Holdings to $67 From $62, Notes 'Slight Improvement' in Outlook; Equalweight Kept

TD Cowen Adjusts Price Target on PayPal to $68 From $58, Maintains Hold Rating

Goldman Sachs Adjusts Price Target on PayPal to $76 From $74, Maintains Buy Rating

JPMorgan Adjusts Price Target on PayPal to $77 From $70, Keeps Overweight Rating

Baird Adjusts Price Target on PayPal to $77 From $70, Keeps Outperform Rating

Evercore ISI Adjusts Price Target on PayPal to $65 From $60, Keeps In Line Rating

Stephens Adjusts Price Target on PayPal to $75 From $70, Keeps Equalweight Rating

BMO Capital Adjusts Price Target on PayPal to $65 From $64, Keeps Market Perform Rating

Citigroup Adjusts Price Target on PayPal to $79 From $73, Keeps Buy Rating

Wells Fargo Adjusts Price Target on PayPal to $65 From $60, Keeps Equalweight Rating

Jefferies Adjusts Price Target on PayPal to $70 From $65, Keeps Hold Rating

Monness Crespi Hardt Raises PayPal's Price Target to $88 From $80

Macquarie Adjusts Price Target on PayPal to $85 From $75, Keeps Outperform Rating

BNP Paribas Exane Adjusts Price Target on PayPal to $64 From $63, Keeps Neutral Rating

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PayPal Announces New Leaders to Build New Advertising Platform and Accelerate Consumer Product Innovation
NEWS PROVIDED BY

PayPal Holdings, Inc.
May 28, 2024, 08:00 ET

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SAN JOSE, Calif., May 28, 2024 /PRNewswire/ -- PayPal Holdings, Inc. (NASDAQ: PYPL) today announced new leadership appointments that will drive the creation of a new advertising platform and strengthen the company's consumer value proposition. Mark Grether will join on May 28 as SVP, General Manager, PayPal Ads, and John Anderson has joined as SVP, General Manager, Consumer Group. Grether and Anderson will report to Diego Scotti, EVP, General Manager, Consumer Group and Global Marketing & Communications.

Advertising Platform
PayPal's long-standing relationships with millions of consumers and merchants make the company uniquely positioned to create an advertising platform that is rooted in commerce. Grether will join the company to build an advertising business that will help make merchants smarter to sell more products and services effectively, as well as enable consumers to discover more of what they love. The advertising business, which will include PayPal advanced offers platform, will use customer insights to build a dynamic, truly personalized platform that will drive better advertising spend performance for merchants while delighting consumers with compelling offers.

Grether has been a leader in the advertising industry for more than 20 years. He joins PayPal from Uber, where he was the Vice President, General Manager of Uber Advertising. Under his leadership, Uber Advertising grew to a $1 billion business with more than 500,000 advertisers globally. He successfully led the acceleration of the company's global advertising business, helping merchants, brands, and other advertisers reach Uber's highly engaged user base across its Mobility and Delivery divisions. Prior to Uber, Grether led the product strategy for Amazon's advertising business, and he served as CEO of Sizmek, one of the largest independent advertising platforms globally, which was sold to Amazon in 2019. Prior to Sizmek, Mark was the co-founder and global COO of WPP's Xaxis, which became a leading programmatic media company.

"Commerce and advertising are deeply connected, and we believe that the advertising platform we are building at PayPal will become a must-use marketing channel for merchants big and small. I'm thrilled to have Mark join our team and lead this important work," said Scotti.

Consumer Business
Anderson has spent over 20 years at the intersection of technology platforms and payments. He will be accountable for PayPal's consumer business, including product strategy for PayPal and Venmo globally. Anderson joins PayPal from Plaid, where he was Head of Product and Payments and oversaw significant growth of Plaid's payment product suite. Prior to Plaid, John spent a decade at Meta in numerous product and leadership roles, including Head of Product for Oculus, Head of Facebook Japan, and Head of product and operations teams for Payments, Commerce, and Risk. Prior to joining Meta, John founded GroupCard, a social greeting and payments platform that was acquired by InComm.

"John brings strong experience in developing groundbreaking, personalized consumer experiences to PayPal, which will drive relevance of our brands, fuel our innovation pipeline, and give more reasons for consumers and merchants to choose PayPal," said Scotti.

About PayPal
PayPal has been revolutionizing commerce globally for more than 25 years. The company creates innovative experiences that make moving money, selling, and shopping simple, personalized, and secure. PayPal empowers consumers and businesses in approximately 200 markets to join and thrive in the global economy. For more information, visit https://www.paypal.com, https://about.pypl.com/ and https://investor.pypl.com/.

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Don't Call It a Comeback: The Best Is Yet to Come for PayPal. Here's Why.
Adam Spatacco, The Motley Fool
Wed, Jun 5, 2024, 6:30 AM MDT5 min read

https://finance.yahoo.com/m/f2ffb9be-8c46-3f60-8157-d6fa68fad841/don%27t-call-it-a-comeback%3A-the.html

The last couple of years have been a roller-coaster ride for PayPal (NASDAQ: PYPL). During the peak days of the pandemic, the business experienced abnormally high demand as e-commerce transactions became more widely used. An overly euphoric base of investors poured into PayPal stock, rocketing shares to a high of $308.

Today, they trade for about $62. What happened? As the height of the pandemic waned, PayPal's business results followed, and its growth began to slow. Moreover, the fintech landscape is highly competitive, which makes it difficult for the company to maintain or acquire market share.

Over the past year, PayPal has undergone something of a makeover. While the company is still in a turnaround, recent financial and operational highlights look encouraging. Let's explore how PayPal is reinventing itself and assess why now is a great time to scoop up shares.

What's new at PayPal?

There is virtually no shortage of solutions in the fintech realm. Products and services such as peer-to-peer payments; buy now, pay later (BNPL), or linking bank accounts in payments apps are offered by a number of different companies. PayPal is considered a pioneer in digital payments, and the company operates a number of useful platforms including Venmo, Honey, and more.

The problem? The company hasn't done a great job of marketing its ecosystem, and so consumers pass up using PayPal in lieu of other apps. With transaction fees the primary driver of revenue, decelerating use has been a problem.

Last summer, its board of directors named Alex Chriss as the company's new CEO. He was a former executive at financial services company Intuit and was responsible for much of the company's product road map. Following the appointment of Chriss, PayPal went through management reshuffling, hiring a number of new leaders.

Subsequently, he and his new team spent some time rebuilding PayPal. Specifically, they instituted a number of new services that leverage artificial intelligence (AI). The idea behind this was to have AI serve as the main stitch connecting PayPal's entire payments fabric.

How is the company performing?
For the quarter ended March 31, PayPal generated $7.7 billion in revenue, an increase of 9% year over year. Although this level of growth might look a bit mundane, there was one metric in particular that signals momentum could be reaccelerating. The table below shows its transaction margin over the last year.

For several quarters, PayPal has struggled to expand its transaction margin, and this directly affects its revenue growth, margin expansion, and overall profitability. However, during the first quarter, the company's transaction margin grew by 4% year over year, the highest level it has reached in quite some time.
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PayPal is a compelling long-term investment

The chart below benchmarks PayPal against a number of fintech peers. With a price-to-sales (P/S) ratio of 2.2, its stock trades at a discount to many other financial services businesses. Furthermore, this multiple is only narrowly above the company's all-time low P/S multiple of 1.9.

PayPal's current depressed valuation suggests that investors are flocking to other fintech stocks and perhaps view the company as an archaic payment platform trying to stay relevant among a sea of newer competitors.

I think this is shortsighted, and I see the disparity in trading multiples as a buying opportunity. Will the stock ever reach $308 again? I don't know. But I also don't think it matters.

Buying shares of PayPal should be rooted in a belief in the company's comeback story. Its new growth strategy is still very much in its infancy, so investors should taper expectations for now.

With that said, there are some early indications that these investments are already yielding results. If the company is able to continue improving its transaction margin, it should begin to witness some lucrative growth.

Investors with a long-term horizon might want to consider building a small position as the stock hovers at dirt-cheap prices. A prudent thing to do would be to monitor PayPal's earnings reports over the next several quarters to ensure that the company is keeping up its newfound momentum.

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PYPL cpps 66

P/E 12

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PYPL

Pivot 70.66