PayPal Holdings (PYPL) stock could be worth 20% more, based on management's free cash flow (FCF) guidance and an average FCF yield metric. Investors can short out-of-the-money puts and calls, as well as buy long-dated in-the-money calls to play PYPL. PYPL closed at $67.30 on Friday, Sept. 26, but it's well off a recent peak of $78.22 on July 28. However, it could be worth $81.00 per share. This is based on PayPal's own free cash flow guidance in its Q2 earnings release on July 29. More News from Barchart ...

Group 1: PayPal - PayPal's second-quarter results met expectations, but a 49% drop in free cash flow caused a post-earnings dip, although the company did not change its free cash flow guidance for the fiscal year, suggesting a potential market overreaction [4][6] - The company ended the second quarter with 438 million active accounts, a 2% year-over-year increase, and reported a payment volume of $443.6 billion, a 5% increase compared to the same period last year [5] - PayPal's revenue grew 5% year over year to $8.3 billion, with non-GAAP EPS at $1.40, an 18% increase from the previous year [5] - The new CEO, Alex Chriss, is focused on improving profitability and has introduced new growth opportunities, including an advertising platform for businesses, leveraging PayPal's extensive user data [6][7] - The company is expected to benefit from the growing demand for digital payment methods, driven by the e-commerce industry's expansion and a strong network effect [7] Group 2: Fiverr - Fiverr's platform is facing challenges with a decline in active buyers, down 10.9% year over year to 3.4 million, but revenue increased by 14.8% year over year to $108.6 million [8][9] - Despite fewer buyers, the spend per buyer rose to $318, a 9.8% increase from the previous year, indicating that Fiverr is retaining high-spending customers [10] - Fiverr's non-GAAP EPS was $0.69, a 19% increase from the year-ago period, showcasing strong financial results [10] - The rise of AI poses a threat to some freelance specialties, but it also creates demand for AI-related services, which Fiverr is capitalizing on by connecting businesses with qualified freelancers [11] - The underlying business remains sound, and the growth of the gig economy presents promising opportunities for Fiverr despite its current market performance [11]

Group 1 - PayPal has faced significant sell-offs in 2021 and 2022 due to lower than expected growth rates, failing to maintain historical growth rates between 15% to 21% [1] Group 2 - The company is analyzed by investors with backgrounds in engineering and management, indicating a focus on both economic and technological aspects of the business [1]

Core Viewpoint - PayPal Holdings reported strong first-quarter 2025 results with non-GAAP earnings exceeding estimates, although net revenues slightly lagged consensus expectations Financial Performance - Non-GAAP earnings were $1.33 per share, surpassing the Zacks Consensus Estimate by 15.65% and increasing 23.1% year over year [1] - Net revenues reached $7.79 billion, a 1.2% year-over-year increase on a reported basis and 2% on a forex-neutral basis, but fell short of the consensus mark by 0.43% [1] - Total payment volume was $417.2 billion, up 3% year over year on a reported basis and 4% on a forex-neutral basis [2] - Transaction revenues were $7 billion, accounting for 90.1% of net revenues, down 0.3% year over year, while Value Added Services revenues were $775 million, up 16.5% year over year [3] Operational Metrics - Total active accounts grew by 2% year over year to 436 million, while total payment transactions decreased by 7% to 6.045 billion [4] - Operating expenses were $6.26 billion, down 4.1% year over year, and represented 80.4% of net revenues, a decrease of 450 basis points [5] - Transaction margin improved to 47.7%, an increase of 270 basis points [5] Balance Sheet and Cash Flow - As of March 31, 2025, cash, cash equivalents, and investments totaled $15.8 billion, with long-term debt at $12.6 billion [6] - The company generated $1.2 billion in cash from operations and reported adjusted free cash flow of $1.4 billion [6] - PayPal returned $1.5 billion to shareholders through share repurchases [6] Guidance - For 2025, PayPal anticipates non-GAAP earnings between $4.95 and $5.10 per share, with transaction margin expected to grow in the 4-5% range [7] - Free cash flow is projected to be between $6 billion and $7 billion, with share repurchase plans of approximately $6 billion [8] - For Q2 2025, non-GAAP earnings are expected to be between $1.29 and $1.31 per share, with transaction margin anticipated between $3.75 billion and $3.80 billion [8]