Fintech stocks have been hammered this year due to high inflation, increasing interest rates, and other macroeconomic headwinds. Even category leaders like PayPal stock (NASDAQ:PYPL) is feeling the heat.
Paypal stock (NASDAQ:PYPL) price is down 54% year to date and is down around 72% from the time of its apex in the summer of 2021.
Let’s look at the positive and negative scenarios for this fintech stock.
PayPal Stock has growth potential and seems to be well priced.
PayPal is a prominent supplier of fintech services, but macroeconomic headwinds on its business and negative market trend have recently depressed its share price. Long-term investors will be happy to hear that the core business continues to seem pretty healthy – and the company’s share price has dropped to favorable levels.
PayPal forecasted 11% revenue growth this year on a currency-adjusted basis, and it still expects to generate more than $5 billion in free cash flow despite the more challenging global environment. Because of a robust sales growth expectation, stock buybacks, and management’s new focus on decreasing expenditures and expanding margins, the business has high-profit growth potential.
The company’s future price-to-earnings ratio of 21 is much lower than it has been for the majority of the previous couple of years, and PayPal stock (NASDAQ:PYPL) seems to be reasonably positioned for long-term investors. PayPal, which has a market worth of around $99.5 billion, is similarly selling at less than 20 times this year’s estimated free cash flow. With a $5 billion net cash position, the fintech powerhouse also has a robust balance sheet.
The digital payments business seems to be positioned for long-term expansion, with PayPal benefiting as commerce increasingly shifts to online platforms.
Risk is created by competition and macroeconomic changes.
While PayPal is well-established in its respective sectors of the financial services market, it is also up against some stiff competition. Competing payment options from dedicated fintech and financial services, competitors like Block and JPMorgan Chase might acquire a market share or put pressure on PayPal’s profitability. Apple and Alphabet, two of the most powerful mobile platform owners, have also launched their own digital wallets and payment systems.
While digital payments and other fintech service categories seem to be well-positioned to profit from long-term growth trends, there are still risk factors that might lead PayPal stock to underperform. The valuation of the fintech leader may seem appealing in light of the company’s long-term development potential, but investors should also examine issues that might lead to the stock underperforming.
Should you purchase PayPal Stock right now?
PayPal stock (NASDAQ:PYPL) has a growth-dependent valuation even after large sell-offs, and the company may not be a strong choice for investors who view competitive and macroeconomic constraints as severely restricting upside potential. On the other hand, PayPal is a fantastic firm with significant long-term growth potential, solid financial underpinnings, and a suite of services that will likely continue to experience good engagement despite some present obstacles.
Featured Image – Unsplash © Marques Thomas
Author Okoro Chinedu 
