Investors who bought stocks during the COVID-19 market crash in 2020 have generally experienced some big gains in the past two years. But there is no question some big-name stocks performed better than others since the pandemic bottom.
PayPal's Bumpy Road: One company that has been a lackluster investment in the past two years has been digital payments company PayPal Holdings Inc (NASDAQ:PYPL).
Unlike many other companies, the COVID-19 pandemic in 2020 didn’t hurt PayPal’s business. In fact, economic shutdowns around the world facilitated a broad shift from cash toward digital payments, creating a tailwind for PayPal and other online and mobile payment apps.
At the beginning of 2020, PayPal shares were trading at $110.75. By the beginning of March, the stock was up to $112.86 despite news of the coronavirus spreading in China, prompting concerns about a U.S. pandemic.
PayPal bottomed at $82.07 on March 23, 2020 during the pandemic-driven market sell-off. Fortunately for PayPal investors, the dip did not last long.
By early May, PayPal shares were back at new all-time highs above $140, but PayPal wasn’t done there. By August 2020, PayPal had made it above $200 for the first time.
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PayPal In 2022, Beyond: PayPal ultimately made it to a new all-time high of $310.16 in June 2021 before the stock ran out of gas. A combination of broad market rotation out of high-growth tech stocks, a steep decline in cryptocurrency prices and soaring inflation have weighed on PayPal's growth numbers. The stock initially took a whopping 29% hit on the day after it reported fourth-quarter 2021 earnings numbers in February 2022. Management guided for a 28.7% EPS drop in the first quarter and said revenue growth would slow to between 15% and 17% in 2022.
PayPal shares have since traded all the way back down to $67.58 in June 2022 before rebounding a bit to $93.35 today.
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Even after the steep drop in share price, PayPal stock isn't exactly cheap. The stock currently trades at 4.1 times sales and 19.1 times forward earnings, a reasonable valuation given the company's updated growth outlook.
Unfortunately, investors who bought PayPal stock the day it hit its 2020 pandemic low and held on have generated some disappointing returns at this point. In fact, $1,000 in PayPal stock bought on March 23, 2020, would be worth about $1,095 today.
Looking ahead, analysts are expecting PayPal stock to rebound in the next 12 months. The average price target among the 40 analysts covering the stock is $119, suggesting 27.5% upside from current levels.
