PayPal stock now offers a favorable balance of risks and potential rewards, according to experts. PayPal stock represents a good investing opportunity following a selloff that has left its shares down 46% year to date.
- PayPal is at the forefront of the digital payments industry, helping it grow its business in the future.
- However, PayPal’s adjusted operating margin has gradually declined as its top-line growth decelerates over the past year.
- PayPal faces tough competition in the digital payments sector, which could hurt the company and its investors in the future.
Established in 2000, PayPal provided a payments hub for the online auction site eBay, which bought the company in 2002. In 2015, eBay spun off PayPal as an independent operation that has since become one of the largest online money transfer businesses.
After its management reported 2022 guidance for revenue, earnings, and net new accounts that disappointed Wall Street, PayPal's stock tanked. Amid all the negativity, though, there were some bright spots in PayPal's fourth-quarter financial release.
So is PayPal stock a good buy? Read on to find out.
About PayPal: An Overview
In late 2020, PayPal launched a cryptocurrency trading service, allowing clients to buy and sell Bitcoin. In addition, PayPal customers have been able to use cryptocurrencies to shop at the 28 million merchants on its network from 2021.
On April 20, 2021, PayPal announced crypto on Venmo. The new feature allowed customers to use three types of cryptocurrency, view crypto trends, and make transactions.
Along with its subsidiaries, Venmo and Xoom, PayPal offers web and mobile platforms. Customers can pay for goods, send and exchange money, and borrow. Through PayPal Credit, the company allows customers to access lines of credit.
PayPal competes with Block (SQ) in the cryptocurrency space. The two payment companies are marketing apps that let shoppers get discounts, make installments and buy cryptocurrencies. PayPal's Venmo and the Square Cash App started as person-to-person money-transfer services for family members and friends. Now they have evolved into broad, consumer-focused financial services apps, fueling growth for these leaders in the burgeoning field of digital payments.
For a fee, PayPal converts crypto into equivalent currency at the time of sale. In January, PayPal announced the launch of its own stablecoin, a token pegged to an asset such as the USD or other fiat currency. Stablecoins are used to facilitate crypto conversions.
The growth of “buy now, pay later” online retailing provided PayPal with another revenue boost. In this type of transaction, a customer can delay payment on a purchased item over several months or a year. PayPal asks the seller for a small discount on the purchase price and pockets the difference when the buyer eventually completes the payment.
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Pros And Cons Of PayPal
PayPal is a great reopening play in an investor’s portfolio. The company saw a drop in demand for some transactional services as people stopped travelling and making non-essential purchases. However, as the pandemic subsides, the company is seeing rising payment volumes and demand for digital payment solutions.
There is no doubt that the world is shifting from cash to digital payment systems. PayPal is at the forefront of the digital payments industry, which will help the company grow its business in the future. In addition, other ventures into cryptocurrency could further drive the stock price higher.
On the other hand, PayPal faces tough competition in the digital payments industry, specifically from Visa, MasterCard, Discovery, Google, Apple, Square, and many others. This competition might hurt the company and its investors in the future.
Many investors are fixated on PayPal's active account and revenue goals for 2025, but they might be paying less attention to its goal of increasing earnings at a CAGR of 22% from 2020 to 2025. The firm expects to achieve that growth rate by expanding its operating margin and consistently repurchasing shares.
PayPal has been gradually buying more companies, including Honey in 2020 and Paidy, to expand its ecosystem and gain more users. Meanwhile, its adjusted operating margin has gradually declined over the past few months as its top-line growth decelerates.
Is PayPal Stock A Good Buy?
Thirty-two out of 42 analysts on Yahoo Finance rate PYPL a buy or strong buy. According to stock experts, PayPal is a great long-term investment due to its position as an excellent reopening and a solid growth play, its rising popularity with millennials, its ventures into cryptocurrency, its positioning as a profitable business model, as well as its rising revenues and profits. However, tough competition might hurt the company and its investors in the future.
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