Good morning investors!

Every Thursday we release our latest “Deep Dive” — a high level, easy to follow stock analysis designed to give our Edge+ members an EDGE when it comes to properly valuing a company. We do the heavy lifting so you can make more sound investing decisions.

Today’s deep dive target is PayPal — one of the world’s largest online payment systems.

In today’s article we will look at the company’s performance, recent results, and dive deeper into its valuation to determine whether the stock is a BUY, SELL, or HOLD as we begin 2024, based on our opinion alone.

Before we share our research, what are your thoughts on PayPal?

Alright, grab your coffee and let’s dive in.

Edge Score

We have been diligently working behind the scenes to develop several stock analysis systems for our members. Recently we unveiled our first tool — The Edge Scoring System.

The system takes tons of data and provides a score for 5 different metrics:

• Valuation

• Future Growth Projections

• Past Performance

• Financial Health

• Dividend

The system then takes these five metrics and provides an overall rating for the stock, which we refer to as the Edge Score.

Here is our Edge Score for PayPal:

Below, we will further break down each category and share our methodology for scoring for this company.

Company Background

PayPal Holdings is a multinational fintech company providing online payment services in most countries that support digital money transfers. It acts as an electronic alternative to traditional methods like checks and money orders, processing payments for online vendors, auction sites, and other users in exchange for a fee.

Founded in 1998 as Confinity, PayPal went public in 2002 and was acquired by eBay for $1.5 billion. In 2015, eBay spun off PayPal, making it an independent company once again.

Alex Chriss is the current President and CEO of PayPal.

Source of Revenue

PayPal engages in the development of technology platforms that enable digital payments and simplifies commerce experiences on behalf of merchants and consumers worldwide. Its solutions include:

• PayPal

• PayPal Credit

• Braintree

• Venmo

• Xoom

• Paydiant

The firm also enables consumers to exchange funds with merchants using funding sources, which include:

• Bank account

• PayPal account balance

• PayPal Credit account

• Credit

• Debit card or other stored value products.

PayPal operates through United States and Other Countries geographical segments.

Past Performance

In this section we will go over the company’s recent earnings results and dive into their financial performance over the last few years.

Stock Price History

PayPal shares have risen 133% since its spin-off from eBay in 2015.

Recent Earnings Report

In its recent quarterly report, PayPal reported a net income of $1.1 billion, or $1.19 per share, a 36% increase from last year. Revenue was $7.89 billion, surpassing the $7.82 billion estimate and marking a 8% year-over-year rise.

Total payment volumes surged by 11% to $416.8 billion in the quarter, with payment transactions increasing 8% to $6.6 billion. Adjusted operating margin improved to 18.5%.

While PayPal's unbranded businesses have shown growth, concerns linger over the performance of its branded business like Venmo. The newly appointed management aims to rebuild investor confidence through strategic measures aimed at achieving profitable growth.

Despite the concerns, the company raised its forecast for full-year adjusted profit. PayPal now anticipates an increase in adjusted profit for 2024 by a "mid-to-high single-digit percentage".

PYPL shares are +36.7% since reporting earnings on July 30th.

Income Statement

PayPal's latest income statement signals a positive turn in growth after a period of slowdown, indicating strong recovery potential.

The company reported $31 billion in revenue, up 9% over the past year, alongside a 5% increase in operating income to $5.4 billion. This growth reflects PayPal's ability to manage costs while scaling its operations, with gross profit holding steady at $12 billion and a net income of $4.4 billion, a 2% improvement year-over-year.

The key drivers of this momentum include a 30% revenue growth over the past three years and a 29% rise in operating income, suggesting PayPal is regaining its financial strength. This is particularly important for investors who have been concerned about the recent pullback in growth.

With management’s focus on optimizing operations and expanding its user base, the current figures highlight that PayPal is back on track and well-positioned for future growth.

Thank you for joining us for this Deep Dive of PayPal.

If you enjoyed this deep dive, be sure to LEAVE A COMMENT. We look forward to hearing your thoughts on PayPal and our analysis. And let us know what stocks you want to see in the future.

Thank you, and until next time investors!

Mark & Chris

The Investor’s Edge

Disclosure

This deep dive is for educational and informational purposes only. The authors are NOT financial advisors, thus cannot recommend for you to personally to buy or sell any positions. Positions taken on a particular stock are opinions of the authors and only the authors. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.