Is a PayPal Turnaround on the Horizon?

Core Insights - PayPal, once a high-growth stock, is currently facing significant challenges as its stock price has dropped from a peak of $308.53 in July 2021 to around $78 [1][3] - The company has missed its long-term growth forecasts and is experiencing a slowdown in key metrics such as active accounts and total payment volume [3][7] Company Performance - PayPal's market capitalization is approximately $65 billion, with a current stock price of $69.27 [5] - The company had 434 million active accounts by the end of 2024, generating $31.8 billion in revenue and $6.6 billion in free cash flow for the year [7] - Year-over-year growth rates for active accounts, total payment volume, and revenue have all significantly declined since the pandemic [8] Management Changes and Strategy - Dan Schulman, the former CEO, set ambitious growth targets in early 2021, aiming to double active accounts and revenue by 2025, but these targets were abandoned in 2022 [6][7] - Alex Chriss, the new CEO, is focusing on stabilizing earnings growth by expanding operating margins rather than sacrificing margins for new account acquisition [10] Growth Initiatives - PayPal is enhancing its ecosystem with higher-margin features, including branded checkout tools and the "Pay with Venmo" initiative [11] - The company is also improving the shopping experience with a one-click "Fastlane" checkout service and integrating AI through a partnership with OpenAI [12] Financial Outlook - PayPal's adjusted operating margin expanded to 18.4% in 2024, with adjusted EPS growth of 21% [13] - For 2025, the company expects adjusted EPS to rise by 15%-16%, indicating a stable outlook despite the maturation of its business [14] - Analysts project a compound annual growth rate (CAGR) of 11% for adjusted EPS from 2024 to 2027 [14] Market Position - PayPal's stock is considered undervalued at less than 15 times the midpoint of its EPS forecast, but the company is transitioning from a growth stock to a value stock [15]