Alex Chriss, the new CEO of PayPal, brings a background that aligns perfectly with the company’s rapidly growing sectors. 2023 hasn’t been a kind year for PayPal (NASDAQ: PYPL) shareholders as the stock trailed behind the market, dropping approximately 13%.
But the announcement of the new CEO seems promising. With a resume that perfectly complements PayPal’s most profitable business segment, this could be the catalyst the stock needs. Is it time for a turnaround or a sign to walk away? Let’s delve deeper.
A Promising Duo: Chriss and Braintree
In a significant move, PayPal appointed Alex Chriss as its CEO earlier this month. Chriss’s prior role was as the executive vice president of Intuit’s small business and self-employed division, a major revenue earner for the company. His track record, especially his emphasis on aiding small businesses and individuals, is noteworthy.
PayPal’s business growth has seen a tremendous boost from its Braintree product, which remains a key revenue driver. Known for “Unbranded Processing” in their charts, Braintree has shown remarkable growth and is a significant segment of PayPal’s operations.
Braintree Payments, utilized by well-known businesses like Airbnb, StubHub, and Sierra Trading Post, provides an integrated platform to process transactions via credit/debit cards, PayPal, and its credit services. Given Chriss’s expertise, PayPal can anticipate further expansion, potentially outpacing rivals like Adyen and Stripe.
Indeed, Braintree is already showing an edge over Adyen. In its H1 2023 report, Adyen experienced slower North American growth, due in part to its higher rates compared to Braintree. Consequently, Braintree secured more clients, albeit at slightly tighter margins.
Given Chriss’s profound understanding of the small business sector, it’s expected that Braintree will continue to flourish under his guidance.
PayPal Shares at a Historic Low
Despite its slowing momentum – with a 7% YoY revenue growth in Q2 and an anticipated 8% in Q3 – PayPal’s profitability is on an uptrend. The Q2 earnings per share (EPS) surged by a staggering 414%, and the annual projection is a commendable $3.49, up from $2.09 the previous year.
Analysts anticipate a bright 2024 with a projected $4.46 per share, translating to an impressive 28% growth. Despite this, PayPal’s stock valuation remains incredibly affordable.
Currently trading at 17 times its earnings, the stock’s value is at an all-time low. Factoring in the 2024 projections, the valuation drops to a mere 13.9 times forward earnings. Given the broader market trends, this valuation seems incredibly undervalued. Coupled with an anticipated economic resurgence in 2024, PayPal’s stock is poised for significant growth.
All indicators point to PayPal as a promising investment opportunity. The rebound might not be immediate, but it seems inevitable. For investors looking for short-term gains, this might not be the pick. However, for those willing to navigate the course over the next few years, PayPal presents a compelling investment opportunity.
In the fast-paced world of fintech, PayPal’s trajectory has shown us the cyclical nature of stocks and market dynamics. With a fresh leadership approach, an undervalued stock, and a strong product suite led by Braintree, the company stands at the cusp of a potential resurgence. While the future is never certain in the stock market, informed decisions based on robust indicators can pave the way for promising returns. For investors with a mid to long-term horizon, now might be the opportune moment to consider the value PayPal brings to the table.
