We recently published a list of Jim Cramer Latest Portfolio: 10 Stocks to Watch in September. Since PayPal Holdings Inc (NASDAQ:PYPL) ranks 1st on the list, it deserves a deeper look.
Jim Cramer said during his latest program on CNBC that the Federal Reserve wanted to contain inflation and make sure it’s going in the “right direction” before initiating its first rate cut. With the first aggressive rate cut, Cramer believes “most businesses” can thrive.
Cramer, who is currently in Silicon Valley, said technology companies are, however, not “hostage” to the Fed and they are “automaters.” He said these companies are trying to raise margins by automating “what can be automated.”
Jim Cramer said currently cash is flowing towards companies that “would have been doomed” if the Fed didn’t start cutting rates. He said this was “day one” in many more rate cuts to come, which would create a “backdrop of positivity” for the broader market.
For this article, we chose 10 important stocks Jim Cramer talked about during his latest programs on CNBC. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
PayPal Holdings Inc (NASDAQ:PYPL)
Number of Hedge Fund Investors: 87
When asked about PayPal Holdings Inc (NASDAQ:PYPL), Cramer said he does not have much to say about the company except for “this guy” Alex Chriss (PayPal CEO), who Cramer believes is a “miracle worker.”
“I am a buyer of PayPal.”
PayPal’s CEO Alex Chriss, is opening new growth horizons for PayPal Holdings Inc (NASDAQ:PYPL) beyond just a way to send or receive money. Thanks to his vast experience with small businesses at Intuit, he is integrating valuable features for customers and merchants to boost small business activity on the platform.
What are these features?
PayPal’s Fastlane offers a seamless checkout experience for customers by storing their data after the first purchase, making future transactions faster. Merchants benefit from higher conversion rates, with tests showing guest conversion jumping from 40-50% to around 80%. Fastlane also speeds up the checkout process by 32%, boosting customer satisfaction. PayPal Holdings Inc (NASDAQ:PYPL) charges merchants a fee for this service, which merchants find worthwhile given the increased conversions.
PayPal Holdings Inc (NASDAQ:PYPL) is also benefiting from its partnerships with companies like Meta, Salesforce, and Adobe. Its PayPal Complete Payments Platform (PPCP) has seen a 40% rise in SMB volume this year, thanks to new merchant integrations.
The company is also launching PayPal Holdings Inc (NASDAQ:PYPL) Ads, a high-margin opportunity that leverages its ecosystem of over 429 million active users. The platform allows merchants to target ads more effectively, increasing their return on investment.
Many don’t know but PayPal has also dabbled into cards, with its debit card offering 5% cashback and integration with Apple Wallet. Recent European regulations also allow PayPal Holdings Inc (NASDAQ:PYPL) to use Apple’s NFC technology for contactless payments, enhancing its reach in international markets, especially in Europe where such payments are popular.
PayPal Holdings Inc (NASDAQ:PYPL) bulls believe the stock’s valuation has become attractive. Its forward P/E ratio of 14 is now 55% lower than its five-year average. Wall Street analysts expect PayPal Holdings Inc (NASDAQ:PYPL) earnings to grow 9.5% next year. If we incorporate PayPal new product growth strategy and catalysts, the stock looks undervalued. PayPal Holdings Inc’s (NASDAQ:PYPL) cash sits at about $14 billion, and long-term debt stands at only $9 billion.
Artisan Value Fund stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q2 2024 investor letter:
“We made one new purchase in Q2, adding PayPal Holdings, Inc. (NASDAQ:PYPL), a financial technology company that enables digital and mobile payments between consumers and merchants. PayPal has world-class assets. It operates the largest two-sided payment network (ex-China); owns Venmo, the largest peer-to-peer payment network (ex-China); and owns Braintree, the third-largest modern payment service provider (PSP), which is growing at a similar pace to peers, such as Stripe and Adyen. Each of the PSPs are taking share from legacy competitors such as Worldpay, with significant runway left on remaining share gains. As the original e-commerce payment processor with years of history in the marketplace, PayPal has access to a large trove of customer data, a first-class risk engine and embedded consumer and merchant trust. This is difficult for newer peers to replicate without time and investment. Post-COVID, PayPal’s shares have been pressured by intensifying competition, the threat of which has seemingly been exacerbated by prior management missteps. Shares trade for under 14X next year’s expected earnings, which have been reset materially lower over the past year due to depressed expectations. This is an attractive entry point to purchase a stake in a business with above-average—and improving—unit economics and a strong balance sheet. Competent new management is already leaning on the company’s strong financial position to maximize the value of these assets. While we wait for tangible results, we should have plenty of free cash flow pointed back at us in the form of share repurchases.”
Overall, PayPal Holdings Inc (NASDAQ:PYPL) ranks 1st on Insider Monkey’s list titled Jim Cramer Latest Portfolio: 10 Stocks to Watch in September. While we acknowledge the potential of PayPal Holdings Inc (NASDAQ:PYPL), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PYPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article is originally published at Insider Monkey.