Today we have a speculative idea: take stock of fintech business PayPal (NASDAQ: PYPL) pending a rebound in these shares.
Growth potential and duration: 22% for 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. Hopefully, you know, what to do.
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 are we writing, Are forecasts and hypotheses, not a call to action. It is up to you to rely on our thoughts or not..
And what about the author's predictions
Research, for example 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 perform better than people, but alas, they work worse.
Therefore, we do not try to build complex models.. The profit forecast in the article is the author's expectations. We indicate this forecast as a guideline. As with the investment in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
We love, appreciate,
Investment editorial office
What the company makes money on
We obey Occam and will not multiply things unnecessarily: a 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 American National Retail Association (NRF) predict an increase in spending for Americans this holiday season in November - December. Moreover, the greatest growth is expected in the field of online commerce., where PayPal has a strong position. So the company can look forward to a good quarter - which will return the favor of investors..
Kam he, guys, this is Paypal! So far, cash makes up a large part of settlements even in such a technologically advanced country., like USA, - hopefully, that PayPal will continue to grow. Sure, 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 bode well..
Most likely, ahead of us is a new round of cash persecution and the accelerated development of online commerce - largely due to the eternal pandemic. So stocks will benefit from the influx of investors too., rightly considering, what PayPal will be able to earn from these processes. PayPal, sure, 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 valid - 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 moreover, 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 from scratch, although PayPal canceled the deal, to the delight of its shareholders.
PayPal's development will depend on its ability to expand and acquire small startups. And I'm afraid, that the moment may come, when PayPal buys a too useless startup for too much money, as nearly happened to Pinterest. And then PayPal can suffer from the futility of its acquisition - and with it its shareholders..
All that remains is to rely on the genius of PayPal's management, which, presumably, will continue to go from victory to victory, squeezing more and more profit from your business. But in general, the growth of investments 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 cause stocks to fall. As the well-known analyst Marcus Aurelius said in such cases: "Your power extends over thoughts, but not over events ". It should be understood and accepted.
Season of the witches. The following factors influenced the slowdown in the company's business growth in the last quarter:
- decline in consumer confidence - consumer spending fell;
- logistics problems for merchants, using the company's platform, - they sold less product, than expected;
- increased activity in physical stores to the detriment of online commerce.
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 is 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. I 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.