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San Jose-based PayPal Holdings, Inc. (PYPL) is a global digital payment powerhouse. With a market cap of $67.4 billion, the fintech giant's secure and straightforward platform has made it a go-to choice for online purchases, person-to-person transfers, and business transactions worldwide. Its global reach now extends to over 200 countries, offering services in 25 currencies.
Shares of PayPal have underperformed the broader market over the last year. PYPL has surged 4.9% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 27.5%. In 2024, despite shares of PayPal Holdings rising 5%, it still lags SPX's 11.2% returns on a YTD basis.
Narrowing the focus, PYPL also underperformed the GX Fintech ETF (FINX). The exchange-traded fund has gained about 26.7% over the past year, easily dwarfing the PYPL stock’s single-digit gain during the same period.
PayPal's underperformance in the past year boils down to fierce competition and shifting dynamics in the digital payments space. Tech giants like Apple (AAPL) and Alphabet’s Google are encroaching on its territory, while other fintech players like Adyen, Block (SQ), and Stripe are grabbing market share. Additionally, the breakup with former parent eBay (EBAY) and inflationary pressures have hindered PayPal's growth momentum.
Despite this, shares of Paypal rose after it reported strong Q1 earnings results on April 30, where customer spending remained resilient, while cost cutbacks helped profitability. Moreover, the payments firm raised its adjusted profit guidance for fiscal 2024.
For the current fiscal year, ending in December, analysts expect PYPL to report EPS growth of 9.3% year over year to $4.13. The company's earnings surprise history is mixed. It beat the consensus estimate in three of the last four quarters, while missing on one other occasion.
Despite some downgrades since the last year, the consensus view on PYPL has been bullish overall. Among the 41 analysts covering PYPL stock, the consensus rating is a “Moderate Buy.” That’s based on 14 “Strong Buy” ratings, three “Moderate Buys,” and 24 “Holds.”
This configuration is slightly less bullish than two months before, with 15 analysts suggesting a “Strong Buy.”
On May 1, BMO Capital raised its price target for PayPal to $65 from $64, keeping a "Market Perform" rating. The analyst sees a modest upside in PayPal's 2024 EPS guidance but is cautious about significant gross profit growth. Although PayPal's new initiatives show traction, upcoming Consumer Financial Protection Bureau (CFPB) regulations and potential increased investment spending pose risks.
The mean price target of $73.84 indicates a 14.5% premium to PYPL’s current price levels. The Street-high price target of $88 suggests an upside potential of 36.5%.
On the date of publication, Rashmi Kumari did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
