PayPal: Q1 Resets Expectations & Points To Bottom
(Preview) Company Update (PYPL US) (Buy)
Summary
PayPal shares have rebounded 11% since results, but remain 71% below their July 2021 peak, having more than halved in the past year.
Q1 results were weak, due to a further loss of eBay volumes and poor macro. 2022 outlook was cut, and 2025 outlook was withdrawn.
PayPal was too optimistic on growth, but the strategy has been refocused. We expect growth to reaccelerate and margin to expand.
We believe a mid-teens EPS growth is achievable, based on PayPal's track record and what it expects to achieve even in 2022.
With shares at $91.53, even if they never return to their peak, we expect a total return of 134% (27.1% annualized) by 2025 year-end. Buy.
Introduction
We review our investment case on PayPal Holdings, Inc. after Q1 2022 results were released post-market last Wednesday (April 27).
PayPal shares have rebounded 11% since results, but remain 71% below their July 2021 peak, having more than halved in the past year. Compared to when we upgraded our rating on PYPL to Buy in May 2020,…