5 Crypto Stocks with Biggest Upside

2. Paypal Holdings Inc. (NASDAQ:PYPL)

Number of Hedge Fund Holders: 86

Paypal Holdings Inc. (NASDAQ:PYPL) recently surprised everyone by announcing a stablecoin called PayPal USD (PY-USD). Bank of America said in a report that Paypal Holdings Inc. (NASDAQ:PYPL)’s step might become a “payments catalyst” over time but the adoption of the cryptocurrency asset “is unlikely to be significant in the near term.” However Paypal Holdings Inc. (NASDAQ:PYPL) has several other growth catalysts as the company’s primary business remains poised to grow in the long term.

BMO’s analyst Brian Belski recently said in a note that he expects the S&P 500 to end the year on a higher note since many of their bull case assumptions “have become more credible lately.”

The analyst recommends some growth stocks that he believes have low market valuation (NTM P/E and PEG) and above market earnings growth expectations. Paypal Holdings Inc. (NASDAQ:PYPL) was one of the Belski’s top picks.

RiverPark Large Growth Fund made the following comment about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q2 2023 investor letter:

“PayPal Holdings, Inc. (NASDAQ:PYPL): PayPal shares were a top detractor in the quarter despite reporting better than anticipated 1Q earnings and raising guidance for the remainder of 2023. Revenue of $7 billion grew 9% year over year, an acceleration from the prior year and quarter. EPS of 1.17 grew 33% year over year on better cost discipline leading to better operating margins. The disappointment was centered around weaker gross margins, as unbranded checkout, which has lower gross margins, accelerated faster than branded checkout. Management anticipates this trend to continue and therefore guided to lower gross margins for the remainder of the year. Despite the gross margin headwind, operating margins continue to expand due to expense discipline.

PayPal is the most accepted digital wallet – with almost triple the acceptance of Apple Pay, the number two digital wallet – providing the purest exposure to the secular growth in ecommerce-driven digital payments. PayPal is also a key beneficiary of consumer-to-consumer payment trends through its Venmo peer-to-peer (P2P) payment service. With a 1Q non-GAAP operating margin of 23%, PYPL also has significant margin expansion potential given that competitors Adyen, Visa and Mastercard have 50%-65% operating margins. We believe the combination of the secular growth of eCommerce and P2P payments, along with expanding operating leverage and the strategic use of the company’s significant and growing cash balance should fuel at least a high teens earnings growth rate over the next five years. This, to us, presents an excellent risk/reward given that PYPL trades at a below market multiple.”