Today we have a speculative idea: take stock of fintech business PayPal (NASDAQ: PYPL) in anticipation of a rebound in these stocks.
Growth potential and validity: 22% behind 14 Months; 46% during 3 years.
Why stocks can go up: they fell too hard.
How do we act: we take shares now by 204,64 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
Let us obey Ockham and let us not multiply things unnecessarily: description of the company's business can be found in the overview. You can also see our detailed analysis of the situation in the company for February this year..
Arguments in favor of the company
Fell down. Since July of this year, the company's shares have fallen in price by a third - from 308.5 to 204,64 $. They fell in no small measure due to the latest report., which turned out to be worse than the expectations of the company itself. But you can count on a rebound in stocks due to a number of circumstances..
Holidays. PricewaterhouseCoopers, Deloitte and the US National Retail Association (NRF) predict an increase in spending for Americans this holiday season in November - December. Moreover, the largest growth is expected in the field of online commerce., where PayPal is strong. So the company can count on a good quarter - which will return the favor of investors.
Kam he, guys, this is Paypal! So far, cash is a large part of the calculations, even in such a technologically advanced country., like USA, - hopefully, that PayPal will continue to grow. Certainly, as the last report showed, rollbacks are possible, caused by the slowdown in the reception of cashless payments, but PayPal, due to its colossal size, will always find new opportunities to capitalize on the growth of fintech as such - be it cryptocurrencies or PayPal's presence on Amazon. So the recent fall does not portend anything particularly terrible..
Probably, ahead of us is a new round of persecution of cash and the forced development of online commerce - largely due to the eternal pandemic. So stocks will also benefit from the influx of investors, rightly considering, what PayPal will be able to earn from these processes. PayPal, certainly, not Visa or Mastercard - but in general it is also a systemically important company for the infrastructure of cashless payments. This alone creates an aura of promise for PayPal shares., and her business in this regard looks quite stable.
All the same factors, what ensured the takeoff of the company's quotes and business, still in force, which means, we can expect, that quotes will sooner or later return to their previous form. Finally, PayPal is a huge business with huge bottom line - 20% from proceeds.
What can get in the way
Fintech. The growing popularity of cashless payments and everything, what is connected with them, has consequences: unprofitable startups start to cost obscene money. For example, the company bought the Paidy installment payment application for $ 1.7 billion - which is approximately 25 Paidy annual proceeds. And besides this, What's not clear, is there a profit there and will it be there in principle. Messages about, that PayPal is going to buy unprofitable Pinterest for 45 billion, also did not appear out of nowhere, although PayPal pulled out of the deal, to the delight of its shareholders.
PayPal's growth will depend on its ability to expand and acquire small startups. And I'm afraid, that the moment may come, when PayPal buys a start-up that is too useless for too much money, How Almost Happened to Pinterest. And then PayPal can suffer from the futility of its acquisition - and with it its shareholders..
It remains only to rely on the genius of PayPal management, which, presumably, will continue to go from victory to victory, squeezing more and more profit out of your business. But in general, the growth of investment in fintech around the world is a problem for PayPal, as it means, that the company will have to buy out potentially useless assets at a high price.
Price tag. Even after the fall of PayPal, it's not cheap: P / E under 50, a P / S about 9,7. So stocks can still rock, especially if there are some not very positive news from the point of view of "advertising": disputes with Amazon, lawsuits from regulators over user agreements and other surprises - anything can make stocks fall. As the well-known analyst Marcus Aurelius said in such cases: "Your power extends over thoughts, but not over events". It needs to be understood and accepted..
Season of the witches. The following factors contributed to the slowdown in the company's business growth in the last quarter:
- decrease in consumer confidence - consumer spending fell;
- merchants have logistical problems, using the company's platform, - they sold less product, than expected;
- increased activity in physical stores to the detriment of online trading.
All these factors are temporary, but nevertheless they can hang anchor on the company's reporting for some time. In itself, it's not scary, but, considering the high cost of PayPal, Investors expect "strong growth" from the company, which, due to these circumstances, may not be realized.
What's the bottom line?
Shares can be taken now by 204,64 $. And then there are a couple of options.:
- wait for growth until 250 $ - this is how much the shares were worth back in October. Think, we will reach this level in the next 14 Months;
- wait, when stocks return to level 300 $. Probably, here you have to wait about three years.
