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3 Undebatable Reasons 2024 Could Be This Stock’s Best Year Ever

3 Undebatable Reasons 2024 Could Be This Stock’s Best Year Ever

PayPal (NASDAQ:PYPL) had a terrible year. As of December 28, the stock was down 11% in 2023, a huge disappointment compared to the impressive gains of the major stock indexes.

Since its spin-off eBay as of July 2015, PayPal’s best year was 2020, when shares soared 116%. Investors want a repeat of this type of performance.

Better days could be on the horizon. As we look to the future, here’s why 2024 could be it fintech stocks best year ever.

A new perspective can do wonders

The first thing that could help PayPal stock in 2024 is new CEO Alex Chriss. He succeeded long-time CEO Dan Schulman. A new face could bring a fresh perspective to the company, which investors should be optimistic about.

Chriss has previously hinted at his plans for PayPal. “We will become leaner, leaner and more efficient, driving greater speed, greater innovation and greater impact for customers,” he said at the press conference. Third Quarter 2023 Earnings Call.

Many other companies, primarily those in technology-driven sectors that have benefited greatly from the enormous growth brought on by the pandemic, are following a similar strategy of downsizing their operations. In PayPal’s case, the hope is that a more controlled cost structure can lead to better profitability.

That’s not to say it isn’t already a financially successful business. PayPal is expected to generate $4.6 billion in free movement of capital in 2023. And its balance sheet represents $4.8 billion in net cash.

Additionally, the company benefits from network effects thanks to its two-sided platform, serving consumers and merchants. And it is benefiting from the secular tailwind of digital payments and online shopping.

These positive traits should make Chriss’ job a little easier. For what it’s worth, it can continue Schulman’s goal of finding ways to increase engagement with the existing user base, rather than spending on marketing initiatives aimed at attracting new customers that don’t. will probably not use the service much.

Therefore, Chriss can prove that he is not ignoring the qualities that have made the company a leading payments platform. In 2024, it should be about relentlessly focusing strategy and capital investments on areas of the business that are already working, rather than pursuing initiatives that are not core to the mission.

More favorable economic conditions

For most of its history as an independent company, PayPal has benefited enormously from easy monetary policy. This is clearly evident when looking at, for example, the company’s growth between 2015 and 2021. And it helps explain why the stock has soared during that time.

It is therefore not surprising that when inflation proved to be non-transitory and the Federal Reserve embarked on an aggressive move to increase interest rate, PayPal’s business was hit. The payment platform leans towards discretionary purchases. When consumers shift their spending toward essential items, as they appear to have done over the past couple of years, they have less money left over for less important things.

Next year could reverse these trends. With inflation falling in recent months, the central bank could start cutting rates in 2024. This could provide a huge boost to the economy, mainly by boosting consumer confidence.

For PayPal, the necessary backdrop would be in place to witness accelerated growth in payment volume and revenue. Investors would certainly applaud this outcome, supporting outsized stock price gains.

The stock’s valuation offers significant upside potential

As of this writing, PayPal stock is ridiculously cheap, trading at a forward price/earnings ratio of only 11.1. Over the past three years, this measure has averaged 30.9. It’s accurate to say that there is a ton of pessimism surrounding this company.

Investors should favor stocks with attractive valuations. This reduces the risk of paying too much, which can lead to poor returns. Additionally, buying at a low valuation offers a safety margin.

If PayPal begins to show improving financial results during 2024, it is easy to believe that the valuation multiple will increase significantly. And this constitutes a powerful tailwind for shareholders.

Should you invest $1,000 in PayPal right now?

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Neil Patel and its clients have no position in any of the stocks mentioned. The Motley Fool posts and recommends PayPal. The Motley Fool recommends eBay and recommends the following options: short December 2023 $67.50 calls on PayPal and short January 2024 $45 calls on eBay. The Motley Fool has a disclosure policy.

3 compelling reasons why 2024 could be the stock’s best year ever was originally published by The Motley Fool

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