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Where Will PayPal Stock Be In 10 Years? Targeting Nearly 3x Upside

Jan. 03, 2022 3:38 PM ETPayPal Holdings, Inc. (PYPL)46 Comments


  • PayPal has fallen 40% from highs and delivered negative returns in 2021.
  • The stock used to be expensive: now, it is a compelling investment.
  • I expect the company's ambitions in the buy now, pay later space to help strengthen its checkout network.
  • I rate shares a buy with 265% upside over the next decade.
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Buy Now Pay Later

hapabapa/iStock Editorial via Getty Images

PayPal (NASDAQ:PYPL) was a surprisingly disappointing stock in 2021, as the company saw its growth rates decelerate rapidly as it lapped pandemic comparables. While the previous stock prices were indeed rich when taking into account such

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This article was written by

Julian Lin profile picture

Julian Lin is a financial analyst. He finds undervalued companies with secular growth that appreciate over time. His approach is to look for companies with strong balance sheets and management teams in sectors with long growth runways.

Julian is the leader of the investing group Best Of Breed Growth Stocks where he only shares positions in stocks which have a large probability of delivering large alpha relative to the S&P 500. He also combines growth-oriented principles with strict valuation hurdles to add an additional layer to the conventional margin of safety. Features include: exclusive access to Julian's highest conviction picks, full stock research reports, real-time trade alerts, macro market analysis, individual industry reports, a filtered watchlist, and community chat with access to Julian 24/7. Learn more.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (46)

Spot on with this call! Holy cow, what a disaster for people who actually listened
Absolutely crushed. Stock was around $195 on Jan 3 and $136 today.
@user4447 I thought $170 was a great price and if not for weakness in overall market I would have added. That price might actually be a good price longer term, but PYPL was in direct contrast to amex, visa, etc on the consumer. So is odd. Have not been quite able to tell if bad luck or if PYPL really just sucks right now as others are performing significantly better. So this is a no go for me right now. I am retired, so I am more conservative than if I was 20 or 30 something. Just wanted to put that color in so others know my WHY.
CaptainJackSparrow profile picture
Nobody knows what's going to happen in 10 years. Nobody. Heck, most can't even predict 3 years reasonably well, let alone 10.
glssmrbl profile picture
PayPal would have to be a totally different company to reach those out landish earnings and revenue estimates in 2030. Including those far out estimates in an article is just plain not useful to stock analysis.
Your decade PPS estimates are conservative. PYPL is a millionaire-maker stock.
airlarr profile picture
Julian, I am a fan of yours. But please do not discuss 2030. No one has a clue how that will look in terms of investing.
Years 2022-2023 are the basis for investing at this time.
Julian Lin profile picture
@airlarr Thank you for your comment. To be clear, the goal isn't to make an exact guess for 2030 numbers. The idea is to determine what kind of returns we could expect given some assumptions. The thing here with PYPL is that even with realistic assumptions, the projected ROI may not be sufficient given the recent tech crash. That means that PYPL must perform much better than the underlying assumptions.

This kind of thinking helps ensure that we only own the top tier stocks in our portfolio. Otherwise the portfolio would have 500 stocks in it.
Trader of Orange profile picture
PYPL is still overvalued. Might be a buy under 160.
Oilcadaver profile picture
In 50 years it will be 100500X
we're entering a dotcom crash. On average nasdaq stocks lost 90% of its value. You should be predicting a downward trend not optimism
Julian Lin profile picture
@Finding Your Retirement Some tech stocks are bubbly. At this point, there are plenty of legitimate buying opportunities in the market
@Julian Lin come on julian most of these nasdaq stocks don't make a penny. They are living on acquisitions and cheap money both of which are going to die when rates start hiking.
Murad Shawar profile picture
@Julian Lin Having tracked Paypal as a quality company I took advantage of the recent dip, although I started buying too early ($230). My concern about your analysis is that while you do mention its growth in Venmo, you seem to focus on the potential for Buy Now, Pay Later. There have been some recent reports that BNPL is risky, and that the number of non-payers (even "later") is uncomfortably high. Consumers don't use BNPL because it's a cool idea; they do it because their income is too close to basic needs to be able to afford what they want or need. That is precariously close to a level where payments cannot be covered. BNPL may not be such a long-term growth prospect as initially posed. Thanks for the article.
Julian Lin profile picture
@Catskills1 Thanks for reading. I am a bit confused about your stating that I focused so much on the potential for BNPL. As noted in the article, "t is possible that PYPL might not benefit from BNPL as much as pure-play BNPL providers due to potential cannibalism from customers who were already using the "normal" PayPal checkout services. Yet that does not mean that BNPL is not important for PYPL - instead, I expect BNPL to help increase the strength of PYPL's network. In my view, one key reason why PYPL has been so successful is the convenience of checkout: with just one login, customers can use pre-filled address and billing information across all merchants. By adding BNPL solutions to this network, PYPL reduces the risk of its customers using a different network."
@Julian Lin I was commenting (perhaps not clearly) more on the riskiness of using BNPL as a basis for future revenue streams. Thanks for the reply.
BM Cashflow Detective profile picture
In the past few weeks I have built and increased my first position at $PYPL. The stock is oversold and represents a great long-term entry opportunity.

According to analysts' expectations, free cash flow growth is one of the company's strengths, as the development forecast for the next years shows.

Within the next three years, the FCF growth is expected to reach a very high 38.56% by 2024. So PayPal will make a lot of money.

September 2021 FCF $5,003b / year.

December 2024 FCF $10,421b / year.

The company generates substantial margins and is consequently very profitable. A very good TTM CROIC 16.7% clearly proves that PayPal generates high shareholder value.

An own assessment check with regard to quality, valuation and growth expectations comes to the following result.

Valuation check with the P/FCF/G ratio.

(P/FCF ratio FWD 37.29) / (Estimated FCF mid term growth consensus +38.56%) = (P/FCF/G ratio of 0.97).

(0.97 x 100 / 1.00 = 97.00% Discounted Value).

(100% - 97.00% = 3.00% Discount, undervalued, margin of safety).

Quality check with the “Super Magic Formula for Growth Stocks”.

TTM CROIC 16.7% = 97.00% Discounted Value.

Combined CROIC / P/FCF/G ratio = 17.22% actual CROIC = 100% fully valued.

Benchmark: Sector Information Technology CROIC 7.1%.

Thus an additional and natural CROIC leverage potential of 0.52% which is not priced in the previous CROIC.

Estimated mid term return potential of 39.17% CAGR.

(Growth + 38.56%, mid term mean reversion potential + 0.61%).

After then, PayPal is a "Super-Mega Magic Formula Growth Stock" and a strong buy.

Far too good hyper growth not to seize the current opportunity.
Julian Lin profile picture
@BM Cashflow Detective The fundamentals are definitely strong here
It should make payment softwares for house-rent collection etc.
Pierre Rossouw profile picture
Growth stock??? Pathetic laggard really. One hugely overhyped instrument, To be avoided. Competitors show vastly preferable opportunities.
@Pierre Rossouw What makes you say that?
Pierre Rossouw profile picture
@ADrunkenMarcus Seems to be a poor performer, also noting low moat and competitors.
265%? Not great bob.
Julian Lin profile picture
@unan2010 Certainly not the highest in the sector
@Julian Lin Just having fun with you. One thing you have to account for with these big guys (PYPL, SQ) is their ambition to become super apps. Granted the attempt to buy Pintrest was a misfire. But there will be consolidation and growth between ecommerce, mobility, fintech, banking, brokerage, last-mile delivery, and crypto-distributed-whatchamacallit.

I see no reason why PYPL or SQ can't just acquire something like Sofi and keep the growth growing...

Scott Galloway writes it better than I can.
Reluctant Investor profile picture
+ 256% over 10 years? Could be good if things turn cold, but just so many stocks have tripled and quadrupled in the last 5 years. The S&P 500 Index ETFs have risen 370% in 10 years and your diversified. In the meantime I have a small holding in PYPL @ $188. It’s my one non-momentum / recovery stock. I’ll hold on for now but not very excited or optimistic.
Abusultan profile picture
@Reluctant Investor i was thinking the same
Julian Lin profile picture
@Reluctant Investor Much of the tripling and quadrupling of the last 5 years were due to multiple expansion, which isn't a sustainable catalyst.
@Abusultan Me too!
So a 13.5% cagr. That sucks for a growth company.
@kevn1111 This is about investment returns mate, not revenue growth. If you think 13.5% is a bad annual return of investment, the bull market is long in the tooth. Cheers
@luca-schmidt apparently it has been long in the tooth for 7 years. But hey tech keeps it rolling along with easy money. The easy money goes away but tech advances will continue to provide efficiencies
Julian Lin profile picture
@kevn1111 Indeed, there are better options elsewhere.
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