PayPal Stock Went Up 39% in 2024, Outperforming the S&P 500 for the 1st Time in 3 Years

Stock Performance - PayPal stock surged 39% in 2024, outperforming the S&P 500's 23.3% return [1] - The stock had underperformed the S&P 500 for three consecutive years prior to 2024, with returns of -19% in 2021, -62% in 2022, and -14% in 2023 [2] - At the end of 2023, PayPal's stock price was back to its 2017 levels [1] Financial Performance - PayPal's free cash flow is forecasted to reach $6 billion in 2024, up from$4.2 billion in 2023 and approaching the 2021 high of $5.4 billion [2] - Revenue growth in 2024 was modest at less than 8% through the first three quarters compared to the same period in 2023 [4] - Transaction margins improved significantly, reaching 45% in Q1, 45.8% in Q2, and 46.6% in Q3 of 2024 [5] - Operating expenses as a percentage of revenue have decreased, contributing to higher free cash flow [6] Business Strategy - PayPal's Braintree business, an unbranded checkout product, has been a key driver of transaction margin growth [7] - The company has prioritized share repurchases, using 100% of its free cash flow to buy back shares, which has reduced the share count [8] Valuation - PayPal stock is trading at a low valuation of 12 times its free cash flow, making it an attractive investment opportunity [9] - The combination of a cheap valuation and a rapidly decreasing share count suggests potential upside for the stock in 2025 [9]