Can PayPal, which has plummeted nearly 20%, be bought on dips now?
American digital payment giant PayPal (NASDAQ:PYPL) recently announced that it will establish a new partnership with Amazon, allowing Venmo users to use this service as a checkout option on the Amazon platform. Moreover, the company recently acquired Paidy, a Japanese provider of "pay-and-buy" solutions, for a price of US$2.7 billion.
The recent series of good news has not caused PayPal's stock price to bottom out, nor have Wall Street "differentiated" the stock. According to the market data of Investing.com, PayPal's recent share price has been "unstoppable." It has fallen by 18.53% in November and has fallen by 19.09% this year, which is far behind the trend of the US stock market.
On the other hand, analysts at the well-known investment bank Bernstein also downgraded PayPal's rating to "hold" last week and lowered the target price from $260 to $220. The reason is that "the company faces a wide range of risks."
Analysts worry that the e-commerce concentration of large platforms is increasing. For example, Shopify and Amazon have occupied 32% of the U.S. e-commerce market. Shopify has launched its own payment platform, although Amazon will accept Venmo as a payment option from 2022. , But analysts believe that PayPal’s monetization of this business is seriously insufficient. Moreover, PayPal is also facing competition from Apple Pay (AAPL-US) and Square (SQ-US), as well as the “buy first pay later” companies Affirm (AFRM-US) and Klarna, which are growing at a rate of 50-100% every year.
The end of the decline and the bad news of Wall Street giants are coming together. It seems that PayPal is in a bad situation. However, Investing.com surveyed 47 analysts and found that 39 analysts gave the company a buy rating, and another 7 recommended "hold" and only a "sell" rating. The 12-month target price is an average of US$282.25, which is about 48.96% of the current share price.
Why is the division of Wall Street so obvious? Will PayPal soon usher in a bottoming out? Let's take a look together.
First of all, there is no doubt that with the increasingly fierce competitive environment, people are worried that PayPal's position in the industry is being eroded, so the stock has fallen sharply recently and has been significantly oversold. However, regardless of the trend chart, the company's expansion in business cooperation is accelerating, which is worthy of attention.
In terms of performance, according to the latest performance report as of September 30, 2021, PayPal's net income rose by 13% year-on-year to US$6.18 billion. Moreover, the company's free cash flow also increased by 20% year-on-year to US$1.29 billion. In addition, net profit was US$1.32 billion, a year-on-year increase of 3%.
It is worth noting that the transaction volume processed by PayPal through its platform continues to grow. In the third quarter, the company processed a total of 4.9 billion payments, an increase of 22% year-on-year, and the total payment processed increased by 24% year-on-year to reach 310 billion US dollars.
Moreover, PayPal's market penetration rate is as high as 75%, and it is still the most popular online payment solution for merchants, and the PayPal network has been adding new merchants. On the other hand, the company's cooperation with large retailers such as Amazon and Wal-Mart is also worthy of attention, which will undoubtedly improve the company's market position relative to other financial technology companies. PayPal predicts that the total payment volume this year will increase by 33-34%.
In addition, it is also worth noting that after the sharp drop, PayPal is now very cheap. The company expects revenue in fiscal year 2022 to increase by 18% to 30.3 billion U.S. dollars, earnings per share is expected to be 5.36 U.S. dollars, and a price-to-earnings ratio of 36 times. Darrin Peller, an analyst at investment institution Wolfe Research, wrote in the report, "We think PayPal The long-term trend proves that the company’s premium valuation is reasonable."
In general, the market is still controversial about PayPal. On the one hand, it is worried about how the company will face the fiercely competitive market. Overlapping the current supply chain shortage and the lack of stimulus spending, the stock may not be so convincing. force. However, on the other hand, Wall Street is optimistic about the company's rapid network expansion. The company also stated that it does not need to achieve profit growth through large-scale mergers and acquisitions, and long-term investors can pay attention to the stock with caution.
