PayPal fell 16% this week, but a top analyst makes a positive long-term case for the stock that is struggling.
The company’s underperformance follows management uncertainty. PayPal’s CFO, John Rainey, announced last week that he will leave the company at the end of May. Still, Akshata Bailkeri of Bruderman Asset Management has an optimistic case for PayPal on CNBC’s “Fast Money” this week.
The company̵[ads1]7;s stock analyst likes the stock for three reasons:
Sales after the pandemic may pick up
Bailkeri, whose company owns PayPal shares, believes sales will pick up in a post-pandemic world.
“We believe that the online percentage of these retail sales should pick up in 2023,” said Bailkeri. “PayPal is a primary recipient of that.”
2. Its spin-off from eBay is beneficial
She claims that PayPal as an independent company also bodes well for the stock. Although the stock is lower now, PayPal shares reached all-time highs in July last year.
“EBay is not really an overhang anymore,” Bailkeri said. “The company has had significant growth even after spinning out of the company in 2015.”
It is an attractive valuation over a five-year horizon
PayPal trades at a significant growth-adjusted discount compared to competitors, according to Bailkeri. She sees the stock’s volatility as a buying opportunity for gains over the next five years.
“You look at long-term online trends and movements from cash to cashless growth,” she said. “It’s more reflective in a five – year perspective than perhaps in the next couple of quarters.”
Where PayPal is headed
Overall, Bailkeri expects double-digit percentage returns for PayPal over the next five years due to strong secular trends.
“People are going to continue to shop more online and have more payments that are in the digital space,” she said.
PayPal, which reports earnings on Wednesday, is down 26% so far this month.