I can’t think of a more hated large cap stock than PayPal (PYPL) – which reports 1Q23 earnings after the close Monday. While PYPL was extremely overvalued in 2021, I believe it is extremely undervalued today.
In its 4Q22 earnings report, PYPL guided 2023 EPS to $4.87 and said it would use ~75% of Free Cash Flow to buy back stock. At its current price of $76 – therefore – PYPL is trading for less than 16x current year EPS guidance. That’s too cheap for the leading player in electronic payments. And so I like that PYPL is going to use so much money – probably somewhere in the neighborhood of $4.5 billion – to buy back stock at what I believe are undervalued prices.
PYPL has been dead money for about a year now but I think the time is right for the stock to get going.