To say that PayPal (NASDAQ: PYPL) shares – which I own in my own portfolio – have been a disappointing investment over the last year would be an understatement. This time last year, the FinTech stock was trading near $275. Today, however, the share price is near $100.
Recently however, PayPal shares have started to experience a bit of a rebound. It seems that, finally, sentiment towards the stock is improving. Is now the time to buy more PayPal stock for my portfolio then? Let’s take a look.
PayPal shares: time to buy?
PayPal’s recent Q2 results, posted earlier this month, were pretty solid, to my mind. For the period, net revenue amounted to $6.8bn, up 10% year-on-year on an FX-neutral (FXN) basis.
Meanwhile, non-GAAP earnings per share came in at $0.93, below the figure of $1.15 posted a year earlier, but above the consensus forecast of $0.86. Free cash flow for the quarter amounted to $1.3bn, up 22% year-on-year.
During the period, the company processed 5.5bn payment transactions, up 16% year-on-year, with total payment volume (TPV) coming in at $339.8bn, up 13% year-on-year FXN.
Encouragingly, PayPal raised its guidance for the full year. It now expects adjusted profit of between $3.87 and $3.97 per share, up from its previous forecast of $3.81 and $3.93. It also announced a new $15bn share repurchase programme.
Overall, the results showed that the company is continuing to grow, even if it’s lower than it was during the pandemic (when PayPal received a major boost from online shopping).
Price target upgrades
It’s worth noting that on the back of these results, a number of brokers raised their price target for the stock. For example, Wells Fargo raised its target to $123 from $97 while BMO lifted its target to $124 from $114. This is certainly a positive development.
Could an activist investor boost the share price?
Solid growth and price target upgrades are not the only reasons to be optimistic here however. Another thing that stands out to me is that activist investor Elliott Management has recently taken a $2bn stake in the company.
Activist investors like to shake things up in an effort to help companies achieve their full potential. I’m hoping Elliott can do this here. After the stake came to light, the activist investor described PayPal as a company with “an unmatched and industry-leading footprint across its payments businesses”.
My view on PayPal stock now
Putting this all together, I’m more bullish on PayPal stock than I was a few months ago.
The stock is certainly not without risk. One that could potentially jeopardise the growth story (in the near term at least) is a major pullback in consumer spending. With so many consumers struggling at present due to high energy costs, this is certainly something to keep in mind.
However, with the stock trading at just 21 times next year’s expected earnings, I think the risk/reward profile here is relatively attractive. At current levels, I’d be comfortable adding more PayPal shares to my portfolio.
