TLDR: PayPal is a top option to consider in the world of fintech stocks, with strong fundamentals and recent investments in smaller companies making it more resilient. Despite recent user growth challenges, PayPal maintains robust profitability and vendor acceptance. The company has a low valuation compared to the S&P 500, with a forward price-earnings ratio of 11-times, indicating a 50% discount. PayPal is highly profitable, generates significant free cash flow, and has a strong balance sheet. The company’s payment volume is driven by branded and unbranded checkouts, with appealing qualities for investors.
In the world of fintech stocks, PayPal (PYPL) stands out as a top option to consider. Strong fundamentals and recent investments in smaller companies make this fintech player much more resilient compared to others in the industry. Despite recent user growth challenges, PayPal maintains robust profitability and vendor acceptance, setting it apart from trendier payment apps. After experiencing a significant decline in its stock price, PayPal now presents a value opportunity. Its low valuation compared to the S&P 500, with a forward price-earnings ratio of 11-times, indicates a 50% discount.
PayPal’s recent investments in smaller companies, such as Prometeo, position the company for growth and expansion. Prometeo’s platform facilitates seamless global corporate connections to Latin American financial systems, offering simple, automated access to information and payments across 10 countries. This positions PayPal to capitalize on the Latin American market opportunity and provide value to diverse stakeholders. The company’s focus on new ventures and strategic investments highlights its commitment to innovation and growth.
Despite experiencing a significant decline in its stock price, PayPal’s current valuation makes it an attractive investment opportunity. With a forward price-earnings ratio of 11-times, PayPal’s stock is currently undervalued compared to the S&P 500. This low valuation provides investors with a value opportunity, considering PayPal’s extensive scale, broad acceptance, and potent network effects in the digital payments industry. As commerce evolves and crosses borders, PayPal is well-positioned to capitalize on the changing landscape.
Unlike numerous emerging fintech ventures struggling with profitability, PayPal demonstrates financial stability. The company remains highly profitable, reporting $1 billion in net income on $7.4 billion in revenue in the third quarter. PayPal also generates significant free cash flow, projected at around $4.6 billion for 2023. With a solid balance sheet, including $15.4 billion in cash and investments, PayPal is well-positioned to support user acquisition efforts and mitigate financial risks.
PayPal offers numerous appealing qualities that make it a prudent addition to a well-diversified growth portfolio. Its payment volume is driven by branded and unbranded checkouts, with the branded checkout accepted at 80% of top retailers in 2022. While the growth of the branded checkout may be slowing, the unbranded checkout for merchants has experienced a surge, constituting 30% of PayPal’s overall total payment volume (TPV) and showing a 40% increase in TPV in 2022. PayPal’s current valuation presents a compelling reason to consider investing in its shares, as it is undervalued compared to the broader market.
Disclaimer: The opinions expressed in the article are those of the writer and do not reflect the views of InvestorPlace or its affiliates. The writer does not have any positions in the securities mentioned in the article.
