How to Buy PayPal Shares
After racing to an all-time high during the pandemic, PayPal shares dropped even more quickly than they had risen. Languishing at a fraction of its record high, is PayPal a good stock to buy?
In this article, we will take a look at the prospect of investing in PayPal, analysing the bull and bear cases. We will also highlight what the experts said recently when asked for a PayPal stock forecast and demonstrate how to buy PayPal shares in just 5 steps!
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PayPal Stock Analysis
The last five years have been a bit of a wild ride on the stock market for PayPal shares and their shareholders.
The year before the outbreak of the Covid-19 pandemic, in 2019, PayPal shares gained a decent 28.6%. As Covid-19 swept around the globe and the outset of 2020, and many countries entered lockdown, PayPal shares, like many other stocks, took a hit.
Nevertheless, the dip was short lived, as it quickly became apparent that PayPal was to be one of the stocks to benefit greatly from the change in consumer behaviour imposed by the pandemic. As people were restricted to their homes, online retail and digital payments boomed.
PayPal recorded record earnings and the PayPal share priced soared, closing at an all-time high of $308.53 in July 2021. This increase represented a gain of 185% from where the share price had been at the start of 2020.
But after hitting this high, the PayPal stock price moved the opposite way, dropping even quicker than it had risen. By the end of 2022, share price had sunk by 77% from its all-time high. By the end of 2023, it had fallen a further 13.8%. Why the decline? Why is PayPal stock down?
Why Is PayPal Stock Down?
As it became apparent that PayPal was benefitting from the change in consumer behaviour brought about by the pandemic, optimistic investors snapped up shares. This pushed PayPal’s valuation to a level which wasn’t necessarily justified by fundamentals.
At its highest price, PayPal shares were trading at around 70 times their 12-month trailing earnings, significantly higher than the wider S&P 500’s price to earnings ratio of around 25 at the same time.
However, the growth PayPal had experienced during the pandemic was unsustainable. By the end of 2021, PayPal had added more than 120 million active accounts in two years, an increase of almost 40%. Its revenue and operating income rose 43% and 57% respectively over the same time period.
As normality returned to the world and consumer habits changed once again, PayPal was not able to maintain this kind of growth. In 2022, amidst a challenging economic environment, revenue grew just 8%, operating income fell 10% and the company added just 9 million new active accounts.
Why Invest in PayPal
For those that chose to invest in PayPal near its high, the losses will have been substantial. But does the stock warrant consideration in 2024? Does the massive decline in price represent an opportunity to buy PayPal shares cheaply?
Firstly, the valuation. After its considerable share price decline, PayPal shares currently trade at around 18 times their 12-month trailing earnings, lower than the wider S&P 500’s ratio of around 26.
Despite increased competition in the digital payment space, PayPal continues to lead the pack. Its services are available in more than 200 countries around the world and it holds a 41% market share of online payment processing software worldwide.
This is a market which is forecast to continue to grow considerably over the years, which places PayPal in an optimal position to potentially benefit from this growth.
After the whirlwind of the previous two years, PayPal performed well in 2023, despite ongoing economic uncertainty. In the first nine months of the year, revenue grew 7%, total payment volume grew 15% and operating profit soared 27%.
If PayPal can post these kind of numbers in a year where high inflation and rising interest rates weighed on global growth, it should be well-positioned to perform well once these headwinds are removed.
The Risks of Investing in PayPal
However, it’s important to remember that there are risks to consider when investing in PayPal.
Unlike payment processors such as Visa or Mastercard, which process payments for both consumer staple and consumer discretionary items, PayPal’s payments are mostly generated from the latter. In tough economic conditions, discretionary items are typically the first to be cut from consumer budgets.
Inflation is falling in many of PayPal’s key markets, and interest rates are forecast to be cut in 2024, which is good news for discretionary spending. Nevertheless, ongoing conflicts in Ukraine and the Middle East could cause an energy price spike, which could push inflation higher once again in 2024.
Furthermore, as growth slows in advanced economies, this could also see a negative impact on discretionary spending in 2024, which would most likely negatively affect PayPal’s business.
PayPal Stock Forecast
So, what do the analysts currently think about investing in PayPal? From the 33 analysts who were asked to give a PayPal stock forecast in the last three months, there are currently 17 buy, 16 hold and 0 sell ratings for the stock.
The highest PayPal stock forecast gave a 12-month price target of $101, whilst the lowest provided a price target of $57. The average PayPal stock forecast was $70.67.
How to Buy PayPal Shares
With an investing account from Admirals, you can buy shares in PayPal! Follow these steps to learn how to invest in PayPal:
- Open an Invest.MT5 account.
- Log in to the Dashboard.
- Open the web trading platform.
- Search for PayPal stock and click the symbol to open a price chart.
- Create a new order, enter the number of PayPal shares and hit ‘Buy’.
Investing with Admirals
With an Invest.MT5 account from Admirals, you can buy shares in over 4,500 companies and more than 200 Exchange-Traded Funds (ETFs) from around the world at competitive terms. Click the banner below to register for an account today:
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