The price at which PayPal currently trades is reasonable for a company whose annual growth rate is projected to be in the mid-single digits. That doesn't fit with the company's recent history or imminent prospects. The total amount of payments processed by $PYPL has grown at a compound annual growth rate of 25% since 2015.
The corporation invested more than it should have because of the COVID-19 outbreak. However, management anticipates a 15% increase in adjusted earnings in 2023, thanks to more recently implemented cost-cutting measures.
Around 2.9 million net new accounts were added to PayPal during Q3, increasing the total to a staggering 432 million. Additionally, the business is acquiring more senior accounts to boost utilization. Over the last 12 months, it logged 50.1 transactions per account, which is 13.1% more than it did a year earlier.
Additionally, the management group, led by Chief Executive Officer Dan Schulman, no longer believes that PayPal can reach its unrealistic goal of accumulating 1 billion active accounts, which he set at the worst of the pandemic. Instead, PayPal's primary goal is to attract high-value users while increasing engagement among its current clientele. This will be challenging in a weaker economic environment.
If the economy improves after a soft landing in 2023, consumers will be more likely to spend more on luxuries, increasing the company's transaction revenue, and as a result, PayPal stock should gain momentum.
Source: Yahoo Finance