PayPal Shares Punished Despite Long-Term Growth Potential from Business Transformation
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PayPal reported solid Q4 results but the market overreacted to muted guidance, ignoring the company's growth potential from new initiatives like a unified payments "super app".
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PayPal aims to transform its business by 2024, focused on checkout solutions, consumer apps, and consolidating infrastructure to maximize data synergies. This can drive sustainable long-term growth.
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With over 68% market share, PayPal is the dominant player in BNPL and well positioned to benefit as BNPL gains broader adoption over time.
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Consensus forecasts expect PayPal's EPS growth to accelerate starting in 2025 as transformation initiatives gain traction. Based on conservative assumptions, shares could return 25% by 2025.
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Risks include fierce competition, regulatory pressures, and execution challenges in transforming the business. But the current valuation seems to discount the potential for renewed growth.