Should Investors Consider This Financial Technology Company: PayPal Holdings Inc. (NASDAQ: PYPL )
PayPal (NASDAQ: PYPL) was spun off from eBay in 2015 and provides electronic payment solutions to merchants and consumers, with a focus on online transactions. The company had 426 million active accounts at the end of 2021, including 34 million merchant accounts. The company also owns Xoom, an international money transfer business, and Venmo, a person-to-person payment platform.
Highlights:
- PayPal’s value has been cut almost in half since the beginning of the year. While it was feeling the pressure even before releasing its fourth-quarter earnings report, the company’s financial results exacerbated the rout. PayPal didn’t perform nearly as well as investors and analysts expected on several fronts.
- One key metric that scared investors was the company’s net new active accounts (NNAs). During fiscal year 2021, PayPal recorded 48.9 million NNAs and ended the year with 426 million active accounts, representing 13% year-over-year (YOY) growth. However, in its third-quarter earnings report, PayPal had guided for 55 million NNAs for the year, so it came up short of its projections by a wide margin.
- Q4 20221 Earnings Report: PayPal reported its Q4 2021 earnings for the quarter ended December 2021 on Feb. 1, 2021. The Company reported earnings-per-share (EPS) profits of $1.11 versus consensus analyst estimates for $1.12, missing by (-$0.01). Revenues grew 13.1% year-over-year (YoY) to $6.92 billion beating $6.89 billion consensus analyst estimates. The Company added 49 million net new active accounts for a total of 426 million active accounts with a record 5.33 billion transactions for the quarter. Transactions per active account rose 11% to 45 as the Company generated $5.4 billion in annual free cash flow.
Annual Earning numbers for last 4 years
An often-overlooked PayPal metric is its payment transactions per active account, which shows how often PayPal’s ecosystem is used by consumers. That metric was up 11% over last year’s quarter to 45.4 transactions. Active accounts were up 13% for the quarter, but growth has been decelerating for the metric throughout 2021. While PayPal may not be growing its customer base as quickly as it used to, the PayPal ecosystem is being utilized more by existing customers.
PayPal PE ratio:
PayPal is valued lower than other established payment processing businesses like Visa (a P/E of 37) and Mastercard (a P/E of 42), something that hadn’t occurred in the last five years. With the drastic sell-off and still-decent outlook, our analysts believe PayPal is a great buy at this point. With a relatively low valuation and growth ahead, growth investors can put their value caps on and own this stock while it’s down on its luck.
Over the last 4 Quarters PayPal has been reporting higher EPS than estimated.
Things are looking up, starting with that Paidy acquisition. The buy-now-pay-later trend is gaining steam. As the name suggests, consumers can purchase items and pay for them later, often free of interest. Paidy is headquartered in Japan, the world’s third-largest e-commerce market.
Quick Look at Company’s Important numbers
Risk Factor: management affirmed its long-term goal of achieving 750 million users on its platforms. For reference, there were 416 million active accounts at the end of Q3. Three months later during its Q4 call, management scrapped the projection and said the goal is “no longer appropriate.” Such a quick and drastic scrapping of a recently provided objective management is not a good sign.
Stock Recommendation: Company has shown constant revenue growth & on technical grounds the stock Price is being anticipated to go higher. MarketFacts gives a “Buy” rating on the stock at the Price of $108.50 as of February 28th, 2022.
| OMP (USD) (28th Feb 2022) | $108.50 |
| Target Price (USD) | $195.00 |
| Recommendation | Buy |
