PayPal’s 80% Stock Plunge Hasn’t Soured Wall Street
For the majority of PayPal Holdings Inc. analysts, the only way is up. The trouble is, the stock keeps going down.
About two-thirds of the more than 50 Wall Street firms covering the digital payments company have a buy or equivalent rating on the shares, according to data compiled by Bloomberg. And not one has a sell, the data show, something that can’t be said of Apple Inc., Microsoft Corp., or even the latest market darling Nvidia Corp.
Analysts were similarly bullish in mid-2021 when pandemic-fueled revenue growth was pushing the stock to record highs. No one predicted the plunge of about 80% that sent PayPal spiraling to a six-year low late last month. This time around, the market is treading more carefully.
Tejas Dessai, an analyst at Global X ETFs, said investors are “broadly skeptical of fintech names” given their sensitivity to the consumer economy at a time of high-interest rates and inflation. “What makes things harder for PayPal is poor growth and continued margin pressures,” he said. While the stock is a 5.1% holding in the Global X Fintech ETF, the fund has been cutting its position since October last year, data compiled by Bloomberg show.
The San Jose, California-based company has lost nearly $300 billion in market value as revenue growth that was turbocharged during the Covid-19 pandemic has slowed dramatically. The latest issue to rankle investors is sluggish profit margins.
Still, PayPal has one key attraction — it’s dirt cheap. At 12 times projected profits, the stock is trading at a record-low valuation and is cheaper than 90% of the companies in the Nasdaq 100, according to data compiled by Bloomberg.