paypal (POPL) stocks have clearly lost popularity with investors. Stocks have lost 58% of their value over the past year.
The sharp decline was a reflection of disappointing quarterly results, in which the digital payments giant’s growth showed a stutter.
James Fawcett of Morgan Stanley says the last two quarters are “modestly” weaker than expected due to a number of factors.
These include “uneven/disappointing e-commerce growth due to tight year-to-year comparisons, the Omicron option, inflation, supply chain disruptions and the impact of stimulus.”
Indirect hits to consumer spending due to the Russian-Ukrainian crisis are likely to continue to impact e-commerce performance in Q1 2022.
However, while Fawcett believes patience is key here, his long-term bullish thesis remains valid. “We think that with the eventual normalization of e-commerce, the market will better appreciate the strong fundamentals of the PYPL business,” the 5-star analyst wrote.
Fawcett’s comments came after a fireside chat with CEO Dan Shulman at the banking firm’s annual TMT (Tech, Media, and Telecom) conference.
There, Schulman encouraged fundamental business drivers such as average revenue per user, gross user additions, growth in engagement, and incremental growth in the share of e-commerce and digital wallets.
Shulman also highlighted the growing use of the platform; customers used PayPal 17 times a year when he joined the company 7.5 years ago, but that number has now grown to 45 times a year. The CEO attributed this to the increase in new services such as BNPL (Buy Now, Pay Later).
There are other reasons to believe that purchases from PYPL sellers should continue to rise. Along with the growing acceptance of merchants, these include the upcoming addition of Venmo to Amazon, the recent rise of offline channels (iZettle), the ability to pay bills, and cryptocurrency payments.
“This, combined with broader financial service offerings such as high-yield savings accounts and the potential for more BNPL financial products, positions PYPL to post a solid cumulative growth of 20% beyond 2022,” the analyst concluded.
The story goes on
So good news for PayPal, but what does this all mean for investors? Recognizing the strength of the company’s long-term plans, Fawcette rates PayPal stock as “overweight” (i.e. “buy”), and its $190 price target suggests about 93% upside potential in the coming year. (To view the Faucette track record, Click here)
Overall, 37 analysts recently reviewed PayPal’s outlook, with 26 saying “buy”, 10 recommending “hold” and 1 begging for a sell, which adds up to a “moderate buy” consensus rating. The average price target is hardly less optimistic than Novak admits; at $182.36, that figure suggests the stock is up 85% in the coming year. (See PayPal stock analysis on TipRanks)
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Disclaimer: The views expressed in this article are solely those of a selected analyst. The content is for informational purposes only. It is very important to conduct your own analysis before making any investment.