3 Reasons Why PayPal Stock Could Rise in 2024

Reason 1: Positive Q1 Results and Focus on Future Growth

PayPal's latest financial results show encouraging signs of a potential comeback, although the number of active accounts is down slightly. The company's revenue rose as much as 9% year-over-year, beating analysts' expectations. Their adjusted earnings per share (EPS), which now takes stock-based compensation into account for a more accurate picture of profitability, also saw a significant jump of 27%. PayPal's increased transparency underscores their focus on responsible financial reporting.

Reason 2: Strong Transaction Volume Growth

The total value of transactions processed by PayPal (TPV) rose by 14%. This growth was caused by a strong 26% increase in unbranded transactions processed through Braintree, which highlights the success of their payment processing platform for businesses. While branded transactions, the traditional PayPal experience, grew at a solid 7%, Venmo, their mobile payment service, also saw a healthy increase of 8% in transaction volume.

These all point towards a trend of increased user engagement, further supported by the 13% rise in the average number of transactions per account. And suggests that existing users are not only sticking with PayPal but also using its services more frequently.

2024: A Year of Strategic Investments

Management sees 2024 as a transitional year for long-term success. Key initiatives

• Improving branded transactions for large enterprises with Fastlane, a one-tap solution showing an 80% conversion rate. Full rollout is expected in the second half of 2024.
• Implementing value-based pricing (how much customers are willing to pay based on the benefits they receive) for value-added services, with a focus on commercial outcomes.
• Transitioning small and medium businesses to the new PayPal Complete Payments Platform (PCPP) for increased product usage and revenue.

Consumer Engagement and Shareholder Value

To keep users coming back again and again, PayPal has given their app a makeover with a focus on rewarding users for their activity. They're currently testing a new rewards program to incentivize frequent use. Furthermore, PayPal is encouraging users to link their debit cards to their accounts. This added convenience could lead to increased product utilization, as users won't have to manually enter payment details every time they want to make a transaction. By implementing these initiatives, PayPal is hoping to strengthen user engagement and strengthen its position as a preferred payment platform.

Reason 3: Undervalued with Buyback Potential

Adding to the potential upside, PayPal's stock is currently trading at a price-to-earnings (P/E) ratio below 14. This metric indicates the stock's price relative to its earnings, and a lower P/E ratio suggests the stock might be undervalued.

Furthermore, analysts expect PayPal's earnings to grow by 10% in the coming year, making the stock even more attractive. The company is also committed to rewarding its shareholders. They plan to generate a significant $5 billion in free cash flow this year, which is the cash readily available after expenses are paid. A portion of this will be used to repurchase $5 billion worth of their own stock. This stock buyback program can increase shareholder value in two ways.

• First, it reduces the number of shares outstanding, which can increase the earnings per share (EPS) and potentially boost the stock price.
• Second, it demonstrates the company's confidence in its future prospects and its commitment to returning value to its investors

Tendencies

• Turnaround signs with solid Q1 results and focus on future growth.
• Strong transaction volume growth across branded and unbranded channels.
• Strategic investments in Fastlane, value-based pricing, and PCPP to drive future growth.
• Increased focus on user engagement through app improvements and rewards programs.
• Undervalued stock with a potential buyback program.

Bottom Line on PayPal

Strong Q1 results, rising transaction volume, and a focus on user engagement suggest PayPal's fall may be ending. With an attractive valuation and shareholder-friendly buybacks, PayPal could be poised for growth in 2024. But do your own research before investing.