PayPal Stock To $89?
PayPal (PYPL) stock has fallen 11% during the past week, and is currently trading at $67.98. Our machine-driven multi-factor assessment suggests that it may be time to buy more shares of PYPL stock. We have, overall, a positive view of the stock, and a price of $89 may not be out of reach. We believe there is a near-equal mix of good and bad in PYPL stock given its overall Moderate operating performance and financial condition. Considering stock’s Low valuation we think it is Attractive.
Below is our assessment:
| CONCLUSION | |
|---|---|
| What you pay: | |
| Valuation | Low |
| What you get: | |
| Growth | Moderate |
| Profitability | Moderate |
| Financial Stability | Very Strong |
| Downturn Resilience | Weak |
| Operating Performance | Moderate |
| Stock Opinion | Attractive |
PYPL stock has fallen meaningfully recently and we currently find it attractive. While this may feel like an opportunity, there is significant risk in relying on a single stock. On the other hand, there is a huge value to a broader diversified approach. If you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio (HQ) – HQ has outperformed its benchmark – a combination of S&P 500, Russell, and S&P midcap index, and achieved returns exceeding 105% since its inception. Risk management is key – consider, what could long-term portfolio performance be if you blended 10% commodities, 10% gold, and 2% crypto with HQ’s performance metrics.
Let’s get into details of each of the assessed factors but before that, for quick background: With $66 Bil in market cap, PayPal provides a technology platform enabling digital payments for merchants and consumers across about 200 markets and 100 currencies globally.
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[1] Valuation Looks Low
| PYPL | S&P 500 | |
|---|---|---|
| Price-to-Sales Ratio | 2.0 | 3.2 |
| Price-to-Earnings Ratio | 14.1 | 23.9 |
| Price-to-Free Cash Flow Ratio | 12.5 | 20.8 |
This table highlights how PYPL is valued vs broader market. For more details see: PYPL Valuation Ratios
[2] Growth Is Moderate
- PayPal has seen its top line grow at an average rate of 7.0% over the last 3 years
- Its revenues have grown 4.1% from $31 Bil to $32 Bil in the last 12 months
- Also, its quarterly revenues grew 5.1% to $8.3 Bil in the most recent quarter from $7.9 Bil a year ago.
| PYPL | S&P 500 | |
|---|---|---|
| 3-Year Average | 7.0% | 5.4% |
| Latest Twelve Months* | 4.1% | 5.2% |
| Most Recent Quarter (YoY)* | 5.1% | 6.2% |
This table highlights how PYPL is growing vs broader market. For more details see: PYPL Revenue Comparison
[3] Profitability Appears Moderate
- PYPL last 12 month operating income was $6.2 Bil representing operating margin of 19.1%
- With cash flow margin of 18.8%, it generated nearly $6.1 Bil in operating cash flow over this period
- For the same period, PYPL generated nearly $4.7 Bil in net income, suggesting net margin of about 14.5%
| PYPL | S&P 500 | |
|---|---|---|
| Current Operating Margin | 19.1% | 18.6% |
| Current OCF Margin | 18.8% | 20.3% |
| Current Net Income Margin | 14.5% | 12.7% |
This table highlights how PYPL profitability vs broader market. For more details see: PYPL Operating Income Comparison
[4] Financial Stability Looks Very Strong
- PYPL Debt was $11 Bil at the end of the most recent quarter, while its current Market Cap is $66 Bil. This implies Debt-to-Equity Ratio of 17.1%
- PYPL Cash (including cash equivalents) makes up $10 Bil of $80 Bil in total Assets. This yields a Cash-to-Assets Ratio of 12.5%
| PYPL | S&P 500 | |
|---|---|---|
| Current Debt-to-Equity Ratio | 17.1% | 21.2% |
| Current Cash-to-Assets Ratio | 12.5% | 7.0% |
[5] Downturn Resilience Is Weak
PYPL has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
2022 Inflation Shock
- PYPL stock fell 83.7% from a high of $308.53 on 23 July 2021 to $50.39 on 27 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $91.81 on 20 January 2025 , and currently trades at $67.98
| PYPL | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -83.7% | -25.4% |
| Time to Full Recovery | Not Fully Recovered days | 464 days |
2020 Covid Pandemic
- PYPL stock fell 31.2% from a high of $123.91 on 19 February 2020 to $85.26 on 23 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 5 May 2020
| PYPL | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -31.2% | -33.9% |
| Time to Full Recovery | 43 days | 148 days |
But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read PYPL Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – S&P 500, Russell, and S&P midcap. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.