PayPal: 32% Down From Peak After Q3 Results, With Potential To Double

(Preview) Company Update (PYPL US) (Buy)

Summary

• PayPal shares fell 10.5% the day after Q3 results last week and, at $212.54, is down 32% from its July peak - a great bargain in our view.

• Q3 volume was flat from Q2, revenues and EBIT were both lower, the 2021 guidance was cut, and new 2022 expectations disappointed.

• The near-term negatives were related to COVID-19 and the planned migration of eBay volumes; medium-term guidance is unchanged.

• PayPal continues to build its ecosystem, with Venmo to be added to Amazon, Buy Now Pay Later growing and its "super app" expanding.

• In our Upside Case, PayPal stock can more than double by 2024 year-end and, in our Downside Case, the total return is still 56%. Buy

Introduction

We review our PayPal investment case following Q3 2021 results released post-market last Monday (November 8). PYPL stock fell 10.5% the following day and is now 32% below its $310 peak in July.

We upgraded our rating on PayPal to Buy in May 2020. Even after its recent fall, PayPal stock has gained 52.6%, though it is down 9…