This Stock Is Down 80% ❤️‍🔥

Dear investor,

PayPal (PYPL) has dropped close to 80% from its peak but has recently shown signs of recovery over the past month. Is this the bottom for the stock?

Why Has PayPal Fallen So Much?

Some key risk factors contributing to the decline include:

- Stagnant User Growth: 
PayPal’s user growth has slowed since reaching its peak in 2022.

- Sluggish EPS Growth: 
Earnings per share (EPS) have increased by only 8.4% since 2020.

- Disappointing Earnings Outlook: 
Management provided a lackluster earnings forecast for 2024.

- Intensifying Competition: 
Rivals like Apple Pay and Google Pay have ramped up their competitive efforts.

How is the Business Performing Amid These Challenges?

- Users: 426 million, down from a peak of 435 million in Q4 2022.

- Total Payment Volume (TPV) 2023: $1.528 trillion.

- TPV 1-Year Growth: 13%.

- P/E Ratio: 16.9.

- 5-Year Average P/E Ratio: 50.

- TTM Sales Growth: 2.1%.

- 5-Year Sales Growth: 14.8%.

- TTM EPS Growth: 14%.

- 5-Year EPS Growth: 24%.

- Long-Term Debt to Equity: 45.9%.

- Return on Equity: 20.5%.

Valuation Assumptions: Where Could the Stock Be in 10 Years?

- TTM EPS: $3.84.

- If EPS grows at 10%: It could reach $9.95 in 10 years. At a 4.29% earnings yield (similar to today’s 10-year treasury rate), the stock could be priced at $231.

- If EPS grows at only 5% and interest rates double to 8.6%: The stock might be valued at $72.67.

Currently, PayPal trades at around $72.

Signs of Interest from Notable Investors

- Mohnish Pabrai, often referred to as the Warren Buffett of India, has taken a 3.2% position in PayPal through his new Wagons Fund.

- Pat Dorsey has also invested heavily, with a 9.7% weighting in his concentrated portfolio.

- Management’s Confidence: The company has announced plans for at least $5 billion in stock buybacks this year.

If you believe in PayPal’s management and their ability to navigate increased competition and return to growth, this stock could be worth considering.

As always, conduct your own research and form your own opinions before making any investment decisions.

Happy investing!

Arigato!

Chloe
Arigato Investor