- PayPal Holdings, Inc. (PYPL) shares closed again on Wednesday, approaching $75.
- This is the latest in a series of new close lows in 2022 for PYPL stock and it is now trading at levels not seen since 2018.
- PayPal shares are cheap and that may tempt investors, but they should pass as things may get worse before they get better for PayPal.
May 11, PayPal Holdings, Inc. (NASDAQ:PYPL) the stock closed down 1.3%, slipping below $75. That might not seem like a big deal in 2022, especially for a tech title. The sector has been hammered as investors shift from growth stocks to safe havens. However, in the case of PYPL stock, 2022 has turned into a “death by a thousand cuts” situation. Add that 1.3% drop to the tally and you’ll see PayPal stock is down more than 70% so far in 2022.
To find a time when PYPL shares were this cheap, one would have to go back to 2018. Even in the aftermath of the March 2020 stock market crash, PayPal shares were worth more.
Investors may find this price tempting. After all, PayPal is an established technology company with a long history. For many people, it is synonymous with online payment. Its Venmo mobile payment and digital wallet are popular, and the company was an early supporter of cryptocurrency. However, the current environment in which the company finds itself is problematic. Add in worrying signs like layoffs and the resignation of a chief financial officer (CFO), and now is not the time to buy PYPL stock. No matter how cheap it is, it’s likely to get cheaper.
|PYPL||PayPal Holdings, Inc.||$78.83|
PayPal thrived during the pandemic, now it’s struggling
PayPal could not have asked for a scenario more conducive to its business than the Covid-19 pandemic. Especially in the beginning, when stores were temporarily closed, everyone shopped online and cash was avoided like the plague. The US government has even allowed direct deposit of stimulus payments to PayPal’s Venmo digital wallet. PayPal has been adding new users at a breakneck pace and the volume of transactions through its network has accelerated.
This company has been one of the winners of the pandemic and shareholders have been very well rewarded. After falling below $87 in March 2020 following the stock market crash, PYPL stock surged. Riding the wave of pandemic growth, PYPL ended 2020 with a return of around 114%, even taking into account the stock market crash. Several times in 2021, PayPal stock has crossed the $300 threshold.
However, since last July, PYPL stock has been in a prolonged slump. In February, after the company lowered its 2022 revenue and profit forecast, shares fell 25% in the stock’s worst performance ever in a single day.
While the pandemic has been a huge boost for PayPal, the post-pandemic recovery has been less kind.
The near future does not look great for Paypal recovery
PayPal is experiencing a significant slowdown in user growth. In 2020, the company added 73 million new user accounts. For 2021, it added nearly 50 million new accounts. In February, the company issued guidelines for adding only 15 to 20 million new user accounts for 2022. At that time, PayPal said it was focusing on adding new users to generate more revenue per user. Analysts weren’t impressed – getting users to spend more is difficult at any time and current economic conditions are hardly conducive to such efforts. Many have started to downgrade PYPL stocks.
Since then, there has been more bad news for PayPal. This includes layoffs and the resignation of the company’s chief financial officer, a seven-year PayPal veteran. When the company announced its first-quarter results on April 27, it had added just 2.4 million new users for the quarter. This makes even February’s low estimate of 15-20 million new users for 2022 seem overstated. We’re not supposed to look at that number anymore, but it’s hardly a positive sign. Additionally, the company further lowered its earnings per share and revenue growth guidance for 2022.
Bottom Line: Don’t Buy PYPL Stock
I’m not saying that PayPal is sunk, just that it will take time to find a new footing. It’s unlikely to happen anytime soon and the economic storm clouds aren’t going to help. After all, it’s a business that depends on consumer spending.
At this point, the PYPL stock earns an “F” in portfolio binder. That may sound like a bargain considering the shares were trading above $300 less than a year ago. However, there are signs that this downward trajectory is continuing. Slowing growth never wows the market, especially the degree of slowdown that PayPal is experiencing. Keep an eye on the company for signs of recovery throughout the year, but don’t risk buying PYPL stock now.
As of the date of publication, neither Louis Navellier nor the member of the InvestorPlace research staff principally responsible for this article holds (directly or indirectly) any position in the securities mentioned in this article.