PayPal stock has been a disappointment. Over the past five years, PayPal's stock price declined 42%, while the S&P 500 and Nasdaq Composite indic

A few reasons to be bullish on PayPal

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2024-05-12 15:30:02

PayPal stock has been a disappointment. Over the past five years, PayPal's stock price declined 42%, while the S&P 500 and Nasdaq Composite indices advanced 81% and 106% respectively. The widely accepted narrative is that PayPal is losing its business to Apple Pay, and new entrants to the space, such as Shop Pay.

The multiples fairly reflect single-digit growth in revenue and flattish gross profit growth. However, if PayPal turns things around and returns to double-digit growth, I believe the stock will take off. PayPal still has the brand name and healthy cash flow, and is a major force in the payments industry.

In today’s essay, I attempted to break down PayPal’s business into components, highlighting that the company is already doing fine in several areas, including international and enterprise. What’s left is reigniting growth in branded checkout in the U.S. And that’s exactly where the company’s focus is.

I believe many people would agree that if PayPal returns to double-digit growth (let’s say high teens), the stock would take off. It has the brand name, the scale, the cash flow, and the analysts’ coverage. However, over the past couple of years, the company struggled to hit this mark, consistently reporting 7-8% growth in revenue (and even poorer gross profit growth). I think this is about to change.