$PYPL (PayPal Holdings) quick facts:
✅ lost 70% top to recent bottom and 61% top to now
✅ major reasons for sell-off:
👉 Growth stocks hit on higher yields
👉 change in Fed’s stance from ultra dovish to hawkish in fight of inflation
👉 disappointing revenue and profit forecasts for 2022
👉 lower consumer spending in recent months and looking ahead (expected)
👉 ongoing supply chain issues
👉 eBay risk (PayPal’s biggest client) , which is in the process of moving to its own separate payments platform
✅ Stock is now at pre-pandemic levels – it wiped out all the covid-19 stay-at-home mania in case of $PYPL specifically
✅ So at current valuation, which is much much more appealing you’re getting the world’s leading payments company with a) slower growth ahead than previously assumed, but b) still very good growth prospects at a much better value (all values here from: app.tikr.com/stock/estimates?cid=112732&tid=306093931&ref=wvhxgl) :
👉 Revenue growth estimates till 2026 +19% CAGR
👉 EBITDA growth estimates till 2026 +22,7% CAGR
👉 EPS growth estimates till 2026 +22,5% CAGR (GAAP)
👉 FCF growth estimates till 2026 +19,4% CAGR – still very high
👉 Gross margin at 50% ish
👉 Negative NetDebt/EBITDA now and forward
✅ According to the FCFF Gordon model using the current estimates till 2026 and assumed average residual FCFF growth of 3% post 2026 and WACC for PayPal equal to the current WACC for $NSDQ100 (7,06%), I come up to the following valuation of $PYPL stock (*detailed calculations availabe upon request):
Present Value (PV) of 2022-2026 FCFF: USD41bn
PV of residual FCFF growth: USD269bn
TOTAL PV of FCFF: USD310bn
TOTAL PV of FCFF per share: USD261 (only USD8bn debt at PayPal as of EY2021; number of shares outstanding 1165m)
TOTAL PV of FCFE per share USD259,1
Risk discount 25%
𝗖𝗨𝗥𝗥𝗘𝗡𝗧 𝗙𝗩 𝗳𝗼𝗿 $PYPL 𝗽𝗲𝗿 𝘀𝗵𝗮𝗿𝗲: 𝗨𝗦𝗗𝟭𝟵4,3𝟱 (60% 𝘂𝗽𝘀𝗶𝗱𝗲)
Technicals add up too…
Above you can see a Weekly candles graph for $PYPL since it’s been traded on Nasdaq. There’s been 8 instances when the stock gave a buy MACD signal on Weeklies. The following returns to have been realized untill an appropriate sell signal were:
+1,7% +72% +5,2% +28% +0,4% +46% +6,4% -4,5%
AVERAGE RETURN +19,4%
Right now (if the stock closes this week here or higher) PayPal is again giving a Weekly technical buy signal and this time from very oversold levels. Upside from here for the patient ones can be very nice :).
Yours, GlobalAlphaS
*𝑫𝑰𝑺𝑪𝑳𝑶𝑺𝑼𝑹𝑬: $𝑷𝒀𝑷𝑳 𝒊𝒔 𝒏𝒐𝒘 𝒕𝒉𝒆 𝒃𝒊𝒈𝒈𝒆𝒔𝒕-𝒘𝒆𝒊𝒈𝒉𝒕 𝒔𝒕𝒐𝒄𝒌 𝒊𝒏 𝒎𝒚 𝑷𝒐𝒑𝒖𝒍𝒂𝒓 𝑰𝒏𝒗𝒆𝒔𝒕𝒐𝒓 𝒑𝒐𝒓𝒕𝒇𝒐𝒍𝒊𝒐. 𝑻𝒉𝒊𝒔 𝒊𝒔 𝒏𝒐𝒕 𝒂𝒏 𝒊𝒏𝒗𝒆𝒔𝒕𝒎𝒆𝒏𝒕 𝒂𝒅𝒗𝒊𝒄𝒆, 𝒃𝒖𝒕 𝒓𝒂𝒕𝒉𝒆𝒓 𝒎𝒚 𝒑𝒆𝒓𝒔𝒐𝒏𝒂𝒍 𝒐𝒑𝒊𝒏𝒊𝒐𝒏
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