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PayPal: 19x P/E, Catalyst And Potential For Higher Stock Buybacks

Sep. 05, 2022 1:34 AM ETPayPal Holdings, Inc. (PYPL)12 Comments
The Asian Investor profile picture
The Asian Investor
21.73K Followers

Summary

  • Strong free cash flow and high margins likely attracted activist investor Elliott Management to PayPal.
  • As top line growth is slowing, investors may look forward to receiving an up-sized stock buyback.
  • PayPal’s stock is cheap, making this a great time to buy back stock.
PayPal"s Stock Tumbles On Poor Quarterly Earnings Report

Justin Sullivan

Shares of PayPal (NASDAQ:PYPL) are down 70% from their all-time high, but the potential for appreciation may be under-rated considering that the financial services company recently received a $2.0B investment from activist investor Elliott Management. Since PayPal generated $1.3B in free cash flow per

This article was written by

The Asian Investor profile picture
21.73K Followers
I look for high-risk, high-reward situations. Five largest portfolio holdings: Bitcoin, SoFi, Alibaba, PayPal, Western Alliance. Early buyer of cryptocurrencies. I live in Thailand :)

Analyst’s Disclosure: I/we have a beneficial long position in the shares of PYPL either through stock ownership, options, or other derivatives. 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 (12)

S
Just brought up to a full position. I think the downside has been beaten out of it. Fed may raise rates a couple more times, but my sense is they are on the right track. If they just weren't fighting a foolish administration/ legislative branch who keep fanning inflation fires.....
G
at this P/E, GOOG is much better than PYPL
CompoundingDollaz profile picture
PYPL - the poster child for dead money.
A
Share buybacks is fighting the fed, and allowing higher ups to exercise their stock options to dump on retail in the near future. Giving back to the investors through buybacks will ruin the demand for this company if not already. if further interest rate hikes continue, particularly to a fintech company like paypal that’s primarily bases its revenue from middle class Americans it will be a recipe for disaster. Why else would the eps be manipulated this way. There is no impact on earnings either. Alibaba did this and got nothing more than lower prices and an increase in volatility if im correct.
Shangrila Value profile picture
@AngelMartinR but, it always takes "it's 3% share", so it's kinda inflation resistant.
b
No reason to chase it, however a decent value to buy on dips for a small position to be added to over time.
Nathan Hanks profile picture
I like PYPL, as a user, purely from an ease of use perspective. But Apply Pay is also awesome.

Even though I like PYPL as a user, I don't see anyone talking about business fundamentals, meaning, where is the intrinsic value drivers which will propel it higher? I'm not talking about analytics from analyzing financial statements.

So for me, sure it might be a good short-term investment, but it seems to me it has long-term risk as they don't have a clear differentiator in the market.
CompoundingDollaz profile picture
@Nathan Hanks PYPL has suffered the same fate of V and MA. Too many players and little to nothing differentiating them from anyone else. Yes, agreed, PYPL is easy to use - but so are 1/2 dozen others. PYPL should have stayed out of crypto, IMO. There are no catalysts or growth drivers for this stock. It will only go higher with the tide that carries most everything else higher over time (hopefully). But with the red flags we see and continue to face in the world's economies, this is dead money. Better off buying a 10K iBond if you want to actually get a decent return.
d
A 1% biden buy back tax, and all metrics are positive. Why is this stock down 70%? It is still growing and has a billion or more in FCF each quarter.
The Asian Investor profile picture
@div invester The stock ran ahead of itself during the pandemic boom
Cristi_an profile picture
SBC and a mediocre CEO to balance the PE and buybacks
The Asian Investor profile picture
@Cristi_an $15-25B in buybacks and $5-6B in annual free cash flow are good reasons to buy the stock, I believe :)
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