Master your fundamental research. Join 78,618 investors who trust our platform and content.
Save 54+ hours of fundamental research with free access to Stock Card.
We only ask your name and email address.
$PYPL dropped ~6%+ after its earnings call on Wednesday after hours.
The stock has been a poor investment recently, down 14% in the last five years, despite hitting an all-time high in 2021.
PayPal is the original Fintech and should still have a long growth potential ahead. But the stock price in recent quarters tells a different story.
What can we learn from its latest earnings report about its long-term potential? Read more on this thread.
Interesting Stuff From PYPL's Earnings
So, $PYPL is extracting more value from its current base.
Why doesn't it grow its base?
The mgmt. says it is intentional and is focusing on engaging the current base.
Revenue grew 8%.
Score: Fair to Good - Not a high-growth company anymore!
PYPL's Bottom Line
Score: Fair to Good -- Directionally moving toward higher profitability.
PYPL's Balance Sheet
~ $12B+ cash & cash equivalent
vs. ~$10B in total debt
Strong cash held from customers' balances.
PYPL's Free Cash Flow
Impacted the fair value deduction of the BNPL loans being sold to KKR, the company took a $1.2B hit to its FCF.
It seems to be an excellent decision to avoid holding the loan balance on the balance sheet.
PYPL is a solid free cash flow generator with a trailing 12-month FCF of ~$5B.
Score: Good -- watch for other short-term impacts
Because PYPL is a more mature company (profitable, FCF), using P/E is a good valuation indicator.
In this case, a Forward P/E of 15X is relatively undervalued.
Even with the 3X P/S ratio, the stock isn't too expensive.
To grow sales 3X in the next ten years, PYPL needs 12% annual rev growth. This is in the range of the overall market and PayPal's revenue growth.
Score: FAIR to GOOD -- Watch for earnings and rev growth.
Is PYPL A Buy Now?
The company's fundamentals remain strong, despite the stock price
The stock price could be a good buying opportunity.
No expectation of crazy 5X - 10X growth potential
I own it, and plan to hold it.
See you next time!