Case Study: Paypal (PYPL) stock according to high performing analysts
Key Points
Performance
PayPal shares fell by 2.74% this week, pushing their year-to-date gains down to 8.34%. This compares favorably to the S&P 500, which is up by 6.96% during 2023 thus far.
Event & Impact
PayPal posted fourth quarter results this week, beating Wall Street estimates on both the top and bottom lines. During Q4, PayPals’s revenue totaled $7.4 billion, beating Wall Street’s consensus estimate by $10 million, representing 6.9% year-over-year growth. PayPal’s Q4 non-GAAP earnings-per-share came in at $1.24, beating estimates by $0.04/share.
Noteworthy News:
PayPal beat analyst estimates on both the top and bottom-lines and raised 2023 full-year guidance during its Q4 report; however, the company's CEO also announced that he was leaving that position at the end of 2023, leading to leadership uncertainty.
Nobias Insights
52% of recent articles published by credible authors focused on PayPal shares offer a “neutral” bias. 2 out of the 4 credible Wall Street analysts who cover PYPL believe shares are likely to rise in value. The average price target being applied to PYPL by these credible analysts is $88.33, which implies upside potential of approximately 9.3% relative to the stock’s current share price of $80.80.
Bullish Take Nobias 4-star rated author, Royston Yang, said, “It may take some time for the company to get back on its feet, but PayPal still possesses a long growth runway as its total addressable market remains at $110 trillion.”
Bearish Take Reinhardt Krause, a Nobias 5-star rated author, said, “Total payment volume processed from merchant customers climbed 5% to $357.4 billion. Analysts had projected total payment volume of $360.38 billion.”
PYPL Feb 2023
PayPal (PYPL) announced Q4 earnings this week, beating Wall Street’s consensus estimates on both the top and bottom lines. PayPal’s management team also raised full-year earnings-per-share guidance.
However, even with this beat and raise quarter in mind, PYPL shares dipped by 2.74% this week. This diminished the stock’s year-to-date gains a bit. Now, PYPL shares are up by 8.34% during 2023 thus far. This is down from the nearly 15% gains that PayPal posted during January, but the stock’s 8.34% still beats the S&P 500’s year-to-date gains of 6.96%.
Bullish Nobias Credible Analysts Opinions:
Prior to PayPal’s recent earnings report, Nobias 4-star rated author, Royston Yang, published an article at the Motley Fool which highlighted the stock’s strong year-to-date rally. On February 8th, Yang noted that PayPal shares had risen by 14.4% in January alone, and touched upon a couple of macro catalysts that were benefitting the stock. He wrote, “The somber mood from last year has lifted somewhat as the Federal Reserve has pledged to slow down its interest rate hikes. With inflation moderating, investors have become more optimistic that the rate hike cycle is coming to an end soon, and have pushed up the prices of a wide swath of growth stocks.” Furthermore, he said, “PayPal is also looking forward to an increase in spending as China finally sheds its years-long strict zero-COVID policies.”
With regard to increasing demand for international travel coming out of the COVID-19 pandemic, he touched upon PayPal’s recently announced plans to launch a new service within its Xoom international money transfer service, named Credit Card Deposit. He said, “This service enables Xoom customers in the U.S. to send money directly to users in 25 different countries. PayPal is collaborating with Visa to include easy and secure access to funds, and its launch seems timed to coincide with an expected surge in cross-border payments as more countries resume normality and people fly more frequently for vacations and business trips.”
Yang also mentioned a recent announcement by the company which put a spotlight on job cuts related to roughly 7% of PayPal’s total workforce as well as office closures and other expense cutting measures, which could boost profitability moving forward.
Regarding the stock’s potential to continue to bounce back from the 2022 lows, Yang concluded, “It may take some time for the company to get back on its feet, but PayPal still possesses a long growth runway as its total addressable market remains at $110 trillion.”
Also, coming into PayPal’s recent quarter, Soumya Eswaran, a Nobias 4-star rated author, highlighted recent commentary that Investment management company RGA Investment Advisors provided regarding its outlook for PYPL shares moving forward.
Eswaran quoted the firm’s recent fourth quarter 2022 Investment Letter, which said: “PayPal Holdings, Inc. (NASDAQ:PYPL) suffered with the slowdown in e-commerce, yet still will have outgrown e-commerce when we see final 2022 numbers. Much like Amazon, PayPal invested far too aggressively on the expectation of sustained elevated growth rates in e-commerce and unfortunately, unlike with Amazon, PayPal’s investment was on ancillary product excursions from which the company is already retrenching. The good news is that with this retrenchment, the company should once again return to its recipe of healthy top line growth and incremental margin leverage, but rather than grow back into their old margin structure they will have to cost-cut their way there."
What’s more, Eswaran noted that RGA Investment Advisors isn’t alone in this relatively bullish opinion, writing “PayPal Holdings, Inc. (NASDAQ:PYPL) is in 17th position on our list of 30 Most Popular Stocks Among Hedge Funds.”
Eswaran said that at the end of the third quarter, PayPal was the 97th most held stock in the hedge fund portfolios that they follow, showing bullish sentiment amongst the Wall Street elite heading into the company’s fourth quarter earnings release.
Bearish Nobias Credible Analysts Opinions:
Although PayPal has been a relative outperformer on a year-to-date basis, shares are down by roughly 2.75% this week, largely in response to the company’s Q4 report and the surprise announcement that long-term CEO, Dan Schulman, will be stepping down from that role at the end of 2023.
Reinhardt Krause, a Nobias 5-star rated author, covered PayPal’s Q4 results in an article that he published at Investors.com this week. Looking at the com[any’s top and bottom-line results, Krause said, “PayPal earnings rose 12% from a year earlier to $1.24. The e-commerce company said revenue climbed 7% to $7.4 billion, edging by analyst estimates.”
Regarding Wall Street’s consensus coming into the print, Krause said, “Analysts expected PayPal earnings of $1.20 a share on revenue of $7.39 billion. A year earlier, PayPal earned $1.11 a share on sales of $6.92 billion.”
Krause touched upon one of the more disappointing aspects of PayPal’s Q4 numbers, writing, “Total payment volume processed from merchant customers climbed 5% to $357.4 billion. Analysts had projected total payment volume of $360.38 billion.” Then, he moved onto the company’s 2023 full-year guidance, stating, “For full-year 2023, PayPal forecast earnings per share of $4.87 at the midpoint of guidance, up roughly 18%. PayPal did not provide a 2023 revenue outlook.” He noted that these EPS expectations came in above Wall Street’s estimates, stating, “Analysts had predicted full-year earnings of $4.79 on revenue of $29.89 billion. For full-year 2023, analysts estimate 9.5% total payment volume growth to $1.49 trillion.”
Although the company beat earnings and raised expectations, PYPL’s share price has fallen throughout the week, and Krause attributed that to the CEO change that was announced during the quarter. During PayPal’s Q4 analyst conference call, Schulman touched upon his upcoming departure and the company’s succession planning, saying, “As some of you have noted, I turned 65 last month, albeit I will say, a very young 65. The board and I discussed CEO succession multiple times a year. And that informed the board that I plan to retire from serving as the President and CEO of PayPal at the end of this year.”
“Of course,” Schulman continued, “I will be flexible in my time frame in order to assure we seamlessly onboard the ideal next leader of PayPal, and I look forward to continuing to serve on the PayPal board.” Kate Fitzgerald, a Nobias 4-star rated author, covered Schulman’s departure in an article published this week at American Banker.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Fitzgerald wrote, “In his final year as president and CEO of PayPal, Dan Schulman will focus on expanding the firm's market share within the increasingly competitive online checkout ecosystem.” And she continued, “Even as PayPal remains mired in a global e-commerce sales trough, the company this year aims to modernize its checkout technology by driving toward passwordless, one-click native in-app experiences as well as deploying the next generation of checkout using data and artificial intelligence, Schulman told analysts on Thursday when announcing the firm's fourth-quarter results.”
Overall bias of Nobias Credible Analysts and Bloggers:
Currently, there is a sentiment split between the credible authors and the credible Wall Street analysts that the Nobiasl algorithm tracks when it comes to PYPL shares. 52% of recent articles published by credible authors have expressed a “Neutral” sentiment. The credible analysts who cover PYPL are split bull/bear two to two; however, the average price target being to shares by these four credible individuals is $88.33, which is well above the stock’s current share price.
PayPal ended the week trading for $80.80/share. Therefore, the average credible analyst price target of $88.33 implies upside potential of approximately 9.3%.
Disclosure: Nicholas Ward is long PYPL. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.