Despite the ongoing shift towards the digital economy, 2021 has proven to be a challenging year for PayPal (PYPL).
Shares of this financial technology company are down about 21% on a year-to-date basis compared to 22.4% growth in the Nasdaq composite index.
PayPal’s underperformance stems from tough year-over-year comparisons, eBay’s (EBAY) payment migration, and management’s cautious outlook. PayPal’s management expects tight labor market and retail supply chain disruptions to negatively impact holiday sales and its financial performance.
Now What?
While PayPal stock underperformed the market averages this year, could 2022 change its course?
UBS analyst Rayna Kumar initiated coverage on PayPal stock with a bullish outlook. She stated that the recent selloff in PayPal stock represents an opportunity to buy.
It’s worth noting that PayPal struck a deal with Amazon (AMZN) that would enable American consumers to shop on Amazon with PayPal’s Venmo account. In response to the deal, PayPal’s CEO, Dan Schulman, stated that Amazon’s large market share will significantly boost “the addressable market for Pay with Venmo.”
He added that “Pay with Venmo is one of the key revenue drivers for Venmo going forward.”
Besides the Amazon deal, the acquisition of Paidy and the rapid adoption of PayPal’s BNPL (buy now pay later) offering bodes well for future growth. PayPal stated that since the launch of its BNPL offerings, it has processed $5.4 billion in TPV (total payment volume). Meanwhile, PayPal plans to expand its global pay later portfolio in the first half of 2022.
Further, PayPal stock has positive indicators from insiders and investors. TipRanks’ insider trading activity tool shows that insiders bought $2.3 million worth of its shares in the past three months. Meanwhile, about 10.5% of investors who hold portfolios on TipRanks have raised their exposure to PayPal stock in the last 30 days.
Wall Street’s Take
Wall Street analysts continue to show confidence in PayPal stock. On TipRanks, PayPal sports a Strong Buy consensus rating based on 24 Buys, 5 Holds, and 1 Sell. The average PayPal price target of $276.04 implies 49.3% upside potential to current levels.
Moreover, PayPal stock scores a “Perfect 10” on TipRanks’ Smart Score system, indicating that it could outperform market averages.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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