PayPal Posts Solid Growth Despite Declining Cash Flow; 2024 Guidance Disappoints Investors But Engagement Metrics Improve
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PayPal reported solid Q4 and full-year 2023 results with revenue, operating income, and EPS all growing at high single digit to double digit rates year-over-year. However, full-year free cash flow declined 17.4%.
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Guidance for 2024 expects EPS to be flat to down mid-single digits compared to 2023, disappointing investors.
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While number of active accounts declined in recent quarters, metrics like monthly active users, payment transactions per active account are growing, indicating increased engagement.
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Qualitative analysis indicates PayPal likely still has a wide economic moat from network effects, but declining gross margins and multi-tenanting pose challenges.
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DCF analysis shows PayPal stock trading well below estimated intrinsic value of $105+ per share based on assumed 6%+ long-term growth, presenting a buying opportunity.