Insider Buying Might be a Signal of PayPal's (NasdaqGS:PYPL) Turnaround

By
Stjepan Kalinic
Published
December 16, 2021
NasdaqGS:PYPL
Source: Shutterstock

After sinking over 40% from its peak in July, PayPal Holdings, Inc. ( NasdaqGS: PYPL ) shows some bottoming signs. The price is now around the levels from 13 months ago.

After only selling in the first half of the year, the insiders have recently stepped up and started buying. While we would never suggest that investors should base their decisions solely on what the directors of a company have been doing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

View our latest analysis for PayPal Holdings

The online payment industry is a highly competitive space. Bernstein recently downgraded PayPal quoting the rise of e-commerce platforms that pursue their vertical integration instead of relying on PayPal. Furthermore, they see Square (Block) (NYSE: SQ) as a significant threat after the acquisition of Afterpay gave them a stake in the booming "Buy Now, Pay Later "(BNPL) segment.

However, not everyone is bullish on BNPL, as Mizuho analyst Dan Dolev trimmed the price targets on the sector, adjusting the target for PayPal as well – even though it is still a relatively small part of the business. Mr.Dolev sees the new price target as US$225, down from US$275.

Meanwhile, participating at the Goldman Sachs 2021 US Financial Services Conference, PayPal's CEO Dan Schulman reflected that PayPal is one of the most trusted brands in the world. He stated that they plan to leverage that brand value into becoming one of the mobile super apps that will take advantage of the changing financial environment.

PayPal Holdings Insider Transactions Over The Last Year

In the last twelve months, the biggest single purchase by an insider was when Independent Chairman of the Board John Donahoe bought US$2.0m worth of shares at US$204 per share.That means that even when the share price was higher than US$191 (the recent price), an insider wanted to purchase shares.Their view may have changed since then, but at least it shows they felt optimistic at the time.

In our view, the price an insider pays for shares is significant.As a general rule, we feel more optimistic about a stock if insiders have bought shares above current prices because that suggests they viewed the stock as good value, even at a higher price.

Happily, we note that in the last year, insiders paid US$2.8m for 14.10k shares.On the other hand, they divested 5.29k shares for US$1.6m - but at a much higher average price.

There was more buying than selling in the last twelve months by PayPal Holdings insiders.The chart below shows insider transactions (companies and individuals) over the last year.

If you want to know exactly who sold, for how much, and when, simply click on the graph below!

insider-trading-volume
NasdaqGS: PYPL Insider Trading Volume December 16th, 2021

There are always plenty of stocks that insiders are buying. So if that suits your style, you could check each stock one by one, or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Insiders at PayPal Holdings Have Bought Stock Recently

Over the last three months, we've seen significant insider buying at PayPal Holdings.In total, insiders bought US$2.8m worth of shares in that time, and we didn't record any sales whatsoever.

Many investors like to check how much insiders own in a company.PayPal Holdings insiders own about US$174m worth of shares (which is 0.08% of the company). In general, that is not much, but PayPal has a massive market cap of over US$224b.

What Might The Insider Transactions At PayPal Holdings Tell Us?

It is good to see recent purchasing and virtually no selling since the company fell from high valuations. This shows that the insiders consider it undervalued and worth investing in.

While the BNPL segment is a hot prospect, we must notice that the economic environment is turning around. With 3 interest rate hikes on the horizon, consumer debt will not be any cheaper. If anything, we can expect that the strength of the brand and management's experience will help in edging out the competition during those times.

Even with these insider transactions can help us build a thesis about the stock, it's also worthwhile knowing the risks facing this company. You'd be interested to know that we found 2 warning signs for PayPal Holdings , and we suggest you have a look.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of interesting companies.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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