As tech companies continue to suffer, PayPal (NASDAQ:PYPL) continues to fight through the difficult times. 2022 hasn’t been easy for most tech companies and it has led to a major dip in stocks. PYPL stock is down 63% over the past year and has gone from $300 to $71 today. As an investor, it was hard to imagine the stock falling this low but the external circumstances led to a huge decline.
The past six months have been significantly tough for the company as the stock went from $192 to the current level. The global payment service provider may continue to see volatility in the short term and we might see a new low coming soon. Even in my previous coverage of the stock, I had mentioned that it will fall further and it did.
With all of that said, here’s why I think PayPal is a great business to invest in, but you should wait for it to hit rock bottom.
PayPal’s Solid Business Model
PayPal has a strong business model and its online payment services have grown over the past two years. It managed to hit 429 million active account holders across the globe and this is no small feat. The company has acquired several businesses to strengthen its position in the competitive industry.
PayPal has a muted forecast for the second quarter and I think the stock will continue the downward journey until the company reports the results. It does have an outstanding operating model and holds a strong position in the industry, but as we return to normal, it might take some time for the company to gain momentum.
The company also cut the revenue forecast after the initial projections and aims to achieve revenue growth of 13% this year, as compared to the previous estimate of 17%. Even the total payments volume guidance is down to 15% to 17% from the previous projection of 21% to 23%.
Venmo Will Drive Revenue and Growth
PayPal’s major growth segment is Venmo and it is standing the test of time. For the first quarter, the total payment volume was $322.98 billion and Venmo accounted for $57.8 billion, which is a significant rise on a year-over-year basis. It is expected that Venmo will grow by 50% this year.
After acquiring Venmo in 2013, the company has come a long way and it aims to make it a money-generating machine. With new functions and capabilities, PayPal will be able to make the most of the acquisition and enjoy consistent revenue from Venmo.
Bottom Line on PYPL Stock
Due to a dip in consumer spending, PayPal has seen a drop in income. It could also be due to the macro economic circumstances that people are careful about what they buy and where they spend their money and this has a direct impact on PayPal’s revenue. It is not going to be easy for PayPal to win investor confidence.
Andrew Jeffrey, a Truist analyst has a price target of $80 with a “Hold” rating for the stock. The analyst is bullish on the stock for the long term, but believes that there could be near-term margin risk and challenges.
However, PayPal is here to change the face of digital payments and it will continue to remain a prominent player in the industry. PYPL stock could be volatile in the short term but rock bottom will mean a good chance to take your position. We might not see PayPal going as high as $300 anytime soon, but it certainly has the potential to grow. If you are keen on investing in the stock, wait for it to hit rock bottom and then make a move.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article.