Mckinsey & Well conclusion: PayPal's recent appointment of CEO Alex Chriss, combined with its promising Braintree segment and undervalued stock, suggests the company may be on the cusp of a resurgence. While immediate gains may not be guaranteed, PayPal presents an appealing investment opportunity for those with a mid to long-term horizon, especially considering its growth potential and fresh leadership.
The year 2023 hasn't been particularly kind to PayPal shareholders, with the stock trailing behind the market and experiencing a drop of approximately 13%. However, the recent appointment of Alex Chriss as CEO offers a ray of hope. His background aligns perfectly with PayPal's rapidly growing sectors, making him a promising leader for the company. The question is, will this leadership change spark a turnaround or is it a sign for investors to walk away? Let's explore further.
A Winning Combination: Chriss and Braintree The appointment of Alex Chriss as PayPal's CEO is a significant move. Chriss's previous role as the executive vice president of Intuit's small business and self-employed division is noteworthy because it aligns perfectly with PayPal's most profitable business segment. His track record, particularly his focus on aiding small businesses and individuals, is impressive.
PayPal has seen substantial growth in its Braintree product, a key revenue driver. Braintree, known for its "Unbranded Processing," has displayed remarkable growth and plays a vital role in PayPal's operations. Braintree Payments, used by major businesses like Airbnb, StubHub, and Sierra Trading Post, offers an integrated platform for processing transactions via credit/debit cards, PayPal, and its credit services. With Chriss's expertise, PayPal could expect further expansion, potentially outpacing competitors like Adyen and Stripe.
In fact, Braintree is already gaining an edge over Adyen. In its H1 2023 report, Adyen faced slower North American growth, partly due to its higher rates compared to Braintree. Consequently, Braintree secured more clients, even if at slightly tighter margins.
Chriss's deep understanding of the small business sector suggests that Braintree will continue to flourish under his guidance.
PayPal Shares at a Historic Low Despite a slowdown in momentum, evidenced by a 7% YoY revenue growth in Q2 and an expected 8% in Q3, PayPal's profitability is on an upward trajectory. Q2 earnings per share (EPS) saw an astonishing surge of 414%, and the annual projection is an impressive $3.49, up from $2.09 the previous year.
Analysts are optimistic about 2024, with a projected EPS of $4.46, translating to a remarkable 28% growth. Despite this positive outlook, PayPal's stock valuation remains incredibly affordable.
Currently trading at 17 times its earnings, the stock's value is at an all-time low. When factoring in the 2024 projections, the valuation drops to a mere 13.9 times forward earnings. Considering broader market trends, this valuation appears significantly undervalued. Coupled with an expected economic resurgence in 2024, PayPal's stock seems poised for substantial growth.
All signs point to PayPal as an enticing investment opportunity. While the rebound might not happen overnight, it appears inevitable. Investors seeking short-term gains may look elsewhere, but for those willing to navigate the journey over the next few years, PayPal presents a compelling investment opportunity.
In the fast-paced world of fintech, PayPal's trajectory reflects the cyclical nature of stocks and market dynamics. With fresh leadership, an undervalued stock, and a strong product suite led by Braintree, the company stands at the brink of a potential resurgence. While the future in the stock market is never certain, informed decisions based on robust indicators can pave the way for promising returns. For investors with a mid to long-term horizon, now might be the ideal moment to consider the value PayPal brings to the table.
