Disclosure: I have a small position in PayPal which I opened last year at a BEP of $88, and I'm considering to invest significantly more at this current price of $64.
Looking back 5 years ago in 2018 when PayPal released their Q1 earnings report at the time, the business was valued slightly more (~$80B) than what it's valued at today (~$71B) after their 2023 Q1 earnings report.
However, the numbers tell a story of a completely different business.
Revenue: $3.69B VS $7.04B (~90%+)
TPV: $132B VS $354B (~168%+)
FCF: $737M VS $1B (~35%+)
OM: Flat on Non-GAAP and GAAP
EPS: $0.57 VS $1.17 (~105%+ Non-GAAP) | $0.42 VS $0.7 (~66%+ GAAP)
The business is guiding for lower top-line quarter on quarter at 7-8% now VS 16-18% 5 years ago.
Fundamentally though, how is it possible for this business to be so punished by the market? Am I missing something or should I be unloading big bucks on PayPal? Based on their EPS forecast of $4.95 this year (up 20% from the year before), it now trades at a forward price-to-earnings (P/E) ratio of 13…
Is it that PayPal was so disgustingly overvalued in 2018 that the valuation is now normalised? Or is the market pricing in an imminent top/bottom line decline (which is contradicting to PayPal's guidance)?
I just don't see it. I see a market that is punishing a strong performing company for not being sexy or milking the term “AI”.
Sources:
https://s201.q4cdn.com/231198771/files/doc_financials/2023/q1/Q1-23-PayPal-Earnings-Release.pdf
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