Fintech companies haven’t had a good start to 2022 and PayPal (NASDAQ:PYPL) is not an exception. The company enjoyed massive success in 2021 with PYPL stock hitting an all-time high of $310 in July but it has been on a downward trend since then. After dropping to $270 in October 2021, the stock has consistently declined and is trading as low as $163 today. The tech sell-off has made it an undervalued stock today but it is only temporary.
As companies prepare to release their December earnings report, it is time for investors to take a position in promising growth stocks. PayPal may be down but it is not out. Wall Street expects a rise in the year-over-year earnings when the company reports the fourth-quarter results on Feb. 1. This may help the stock rebound if the numbers beat expectations.
The company is expected to post $6.85 billion in revenue, which is an 12% year-over-year increase. It already generated revenue of $18.5 billion for the first three quarters of 2021, it is a 20% rise over the same period in 2020. PayPal saw net income of $3.4 billion in the first three quarters of 2021, a 28% rise over the same period in 2020. If the trend continues, we should see the PYPL stock price rising in the coming months.
Massive User Base Fuels PYPL Stock Growth
Nothing reflects the success of a business like a massive user base. PYPL stock is dominating the world of digital payments with an ever-expanding customer base. This is a sign that it is successfully meeting the needs of the users and has a business that is well-positioned to grow. At the end of the third quarter, the company had 416 million active accounts and this is a number that has consistently grown. It added 13.3 million accounts in the third quarter. The Venmo partnership and Paidy acquisition are also going to make a significant difference to the bottom line in the long term.
PayPal regularly introduces new features that attract more individuals to the platform. It is also a huge success with its buy now, pay later (BNPL) service and the earnings will reflect the same. With a rise in the number of users, there will be a surge in the merchants registering on the platform because they will get a chance to target a higher customer base. It will help strengthen the company’s position over time.
The Bottom Line On PYPL Stock
Several analysts have lowered the price target on PYPL stock but are bullish on its long-term prospects. BTIG analyst Mark Palmer has a price target of $270 for the stock with a “buy” rating. Mizuho analyst Dan Doley also has a “buy” rating but a more conservative price target of $200. The analyst is of the opinion that payment stocks can rebound sharply in the second half of 2022.
Barclays analyst Ramsay El-Assal has a price target of $227 with an “overweight” rating on the stock. Analysts are bullish on the stock and the worst mistake investors can make right now is to sell PYPL stock in the dip. Do not ignore the huge growth potential that comes with PayPal. It is now present in several countries across the globe and is only strengthening its position in the competitive industry with new products and services.
Around InvestorPlace, my fellow contributors have similar sentiments. Nicolas Chahine last week noted that with the decline in the PYPL stock price, there’s “very little froth to shed from here.” His long-term prognosis is positive as long as the indexes remain bullish. Faisal Humayun continues to like PayPal shares as a “value creator.” Earlier this month, he wrote that “in the last five years, the stock has delivered returns of 357%” and sees a five-year sustained uptrend. “Sure, there will be phases of price or time correction. But PayPal should deliver robust returns for long-term investors,” he added.
I believe the current dip in PYPL stock is due to the sell-off and an overall investor sentiment which has had an impact on several companies.
However, PayPal is a strong business to own and it is going to continue to generate revenue throughout 2022. The company is fundamentally strong and has the potential to generate returns for investors in the long term. This dip is a good chance to take your position in PYPL stock.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.