PYPL: Blood In The Streets

The carnage in PayPal (PYPL) over the last year plus has been something to behold. PYPL was a beloved $300 stock only 15 months ago. This morning PYPL is set to open around $70 after it warned of a tough holiday quarter yesterday afternoon. In many ways PYPL is the most representative stock of the bear market as first its valuation was contracted by rising interest rates and now slowing growth is hitting it as well.

While the macro environment is brutal with the Fed refusing to take its foot off the gas in its fight against inflation at a certain point value starts to become compelling. Investors are focused on PYPL cutting its full year currency neutral revenue growth guidance from 11% to 10%. But the bigger picture is that PYPL remains a great business that makes a lot of money and is now trading at a compelling valuation.

It’s not like PYPL is going bankrupt. They had Gross Payment Volume of $337 billion on close to 6 billion payment transactions in 3Q22. PYPL’s digital payments platforms – including Venmo – are an integral part of how many businesses and consumers now transact. They are going to make more than $4/share this year and have more than $10 billion in cash and short term investments on their balance sheet.

I’m not saying this is the bottom in PYPL stock. I am saying that PYPL now represents excellent value and long term investors will likely do well from this point. While this is not an All In moment due to the Fed’s maniacal rate hiking I will be buying some this morning.