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PayPal Holdings, Inc. (PYPL) A Bullish Perspective

We recently came across a bullish thesis on PayPal Holdings, Inc. (PYPL) on ValueInvestorsClub. In this article we will summarize the bulls’ thesis on PYPL. PYPL shares were trading at closing price of $62 when this thesis was published.

PayPal Holdings, Inc. operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. It operates a two-sided network at scale that connects merchants and consumers that enables its customers to connect, transact, and send and receive payments through online and in person, as well as transfer and withdraw funds using various funding sources.

Denys Prykhodov / Shutterstock.com

The core business areas now show growth and profitability

PayPal, previously mismanaged under former CEO Shulman with a misguided strategy to become a ‘super app,’ is now under new leadership focused on a better strategy.

Shulman’s strategy led to stagnation in gross profit and unprofitable growth due to a focus on lower-quality customers and various non-core features. The core business areas, including PayPal’s branded checkout and Braintree, are now showing growth and profitability. Although overall gross profit has not increased in three years, recent exits of underperforming initiatives are expected to boost future performance.

Stock price of $80-90+ by 2026

New initiatives, such as the Fastlane product, which simplifies guest checkouts, could significantly enhance profitability by improving the net take rate. Currently, PayPal is undervalued with a low-teens GAAP earnings multiple, and has a solid financial position with a net cash balance and strong free cash flow yield. With ongoing buybacks and potential growth from Venmo and offline transactions, PayPal is positioned for future EPS growth, potentially reaching $6 by 2026 and a stock price of $80-90+.

PayPal also increased its free cash flow outlook from $5 billion to $6 billion. It now expects to buy back $6 billion worth of shares, up from prior guidance of at least $5 billion in share repurchases.

Transaction margin dollar best performance since 2021 

The transaction margin dollars of $3.61 billion during the last quarter, which is nearly half the amount of its total revenue, increased 8%, “the best performance on that metric since 2021,” according to the company.

“We are stronger today than we were six months ago, and we will be stronger six months from now than we are today,” CEO Alex Chriss said in the earnings call.

PYPL is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 82 hedge fund portfolios held PYPL at the end of the first quarter which was 87 in the previous quarter. While we acknowledge the potential of PYPL as an investment, our conviction lies in the belief that some 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 as promising as PYPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

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Exponential Growth on the Horizon: Forget linear growth – AI is poised for a hockey stick trajectory.

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Early investors will be the ones positioned to ride the wave of this technological tsunami.

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Those who saw the potential of tech giants back then are sitting pretty today.

AI is at a similar inflection point.

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Disruption is the New Name of the Game: Let’s face it, complacency breeds stagnation.

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The companies that embrace AI will thrive, while the dinosaurs clinging to outdated methods will be left in the dust.

As an investor, you want to be on the side of the winners, and AI is the winning ticket.

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A New Dawn is Coming to U.S. Stocks

I work for one of the largest independent financial publishers in the world – representing over 1 million people in 148 countries.

We’re independently funding today’s broadcast to address something on the mind of every investor in America right now…

Should I put my money in Artificial Intelligence?

Here to answer that for us… and give away his No. 1 free AI recommendation… is 50-year Wall Street titan, Marc Chaikin.

Marc’s been a trader, stockbroker, and analyst. He was the head of the options department at a major brokerage firm and is a sought-after expert for CNBC, Fox Business, Barron’s, and Yahoo! Finance…

But what Marc’s most known for is his award-winning stock-rating system. Which determines whether a stock could shoot sky-high in the next three to six months… or come crashing down.

That’s why Marc’s work appears in every Bloomberg and Reuters terminal on the planet…

And is still used by hundreds of banks, hedge funds, and brokerages to track the billions of dollars flowing in and out of stocks each day.

He’s used this system to survive nine bear markets… create three new indices for the Nasdaq… and even predict the brutal bear market of 2022, 90 days in advance.

Click to continue reading…