Is Now An Opportune Moment To Examine PayPal Holdings, Inc. (NASDAQ:PYPL)?

By
Simply Wall St
Published
January 04, 2021

Let's talk about the popular PayPal Holdings, Inc. (NASDAQ:PYPL). The company's shares led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Today I will analyse the most recent data on PayPal Holdings’s outlook and valuation to see if the opportunity still exists.

View our latest analysis for PayPal Holdings

What is PayPal Holdings worth?

The stock is currently trading at US$234 on the share market, which means it is overvalued by 24% compared to my intrinsic value of $189.58. Not the best news for investors looking to buy! But, is there another opportunity to buy low in the future? Given that PayPal Holdings’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of PayPal Holdings look like?

NasdaqGS:PYPL Earnings and Revenue Growth January 4th 2021

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. PayPal Holdings' earnings over the next few years are expected to increase by 80%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? PYPL’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. However, this brings up another question – is now the right time to sell? If you believe PYPL should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PYPL for a while, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for PYPL, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you want to dive deeper into PayPal Holdings, you'd also look into what risks it is currently facing. You'd be interested to know, that we found 2 warning signs for PayPal Holdings and you'll want to know about them.

If you are no longer interested in PayPal Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. 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. Simply Wall St has no position in any stocks mentioned.
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