PayPal has fallen 16% this week, but a leading analyst makes a long-term bullish case for the struggling stock.
The company’s underperformance follows leadership uncertainty. PayPal’s chief financial officer, John Rainey, announced last week that he would be leaving the company at the end of May. Still, Bruderman Asset Management’s Akshata Bailkeri made a bullish case for PayPal on CNBC’s “Fast Money” this week.
The company’s equity analyst likes the stock for three reasons:
1. Post-pandemic sales could pick up
Bailkeri, whose company owns PayPal shares, believes sales will pick up in a post-pandemic world.
“We expect the online percentage of those retail sales to increase in 2023,” Bailkeri said. “PayPal is one of the main beneficiaries.”
2. Its eBay spin-off is beneficial
She argues that PayPal as a standalone company also bodes well for the stock. Even though its stock is lower now, shares of PayPal hit all-time highs last July.
“EBay isn’t really an overhang anymore,” Bailkeri said. “The business has grown significantly even after leaving the company in 2015.”
3. It’s an attractive valuation over a five-year horizon
PayPal is trading at a steep growth-adjusted discount compared to its competitors, according to Bailkeri. She sees the stock’s volatility as an opportunity to buy gains over the next five years.
“You’re looking at long-term online trends and the movement of money into cashless growth,” she said. “It’s more thought out from a five-year perspective than maybe the next two quarters.”
Where does PayPal go
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 in the digital space,” she said.
PayPal, which reports revenue on Wednesday, is down 26% so far this month.