Stocks have gotten off to a lackluster start in 2022, with the S&P 500 index down 10% to start the year. It's been an even worse story for growth stocks. Since peaking in November, the iShares Russell 2000 Growth ETF has lost 24%, while the iShares Russell 2000 Value ETF has lost 13% in comparison.

PayPal Holdings (PYPL -1.83%) is one stellar growth stock that has taken a hit. Despite its record year in 2021, which CEO Dan Schulman called "one of the strongest years in PayPal's history," broader market weakness, investors' concerns about macroeconomic factors, and lowered guidance have played a role in PayPal's sell-off. With the stock down 66% from its peak at Thursday's prices, is now a good time to buy the payments giant?

Why PayPal is down

2021 was an excellent year for PayPal, and the stock peaked around $310 per share last July with a lofty price-to-earnings ratio (P/E) around 75 -- so it isn't too surprising that it has taken a hit with other growth stocks.

PayPal benefited greatly from the pandemic-related lockdowns and the shifting consumer trends that moved more economic activity online. The company also benefited from government stimulus, which boosted consumer spending.

It's coming off a monstrous year, surpassing $1 trillion in total payments volume (TPV) for the first time in the company's history. In addition, the company added 49 million new accounts, bringing its total active accounts to 426 million.  The company saw solid revenue growth of 18%. However, expenses also ticked up during the year, and net income declined by 1%.  

With strong tailwinds waning, the company has become more conservative with its forecasts. Management's concerns stem from weaker consumer spending in December, which saw retail sales down 2.5% and consumer spending down 0.6%. Management still expects revenue to grow a solid 15% to 17% this year. However, this was below management's previous guidance of 18% just a few months back and is a big reason why the stock sold off following earnings earlier this month.  

An employee scans a customer's smartphone at checkout.

Image source: Getty Images.

Why it's a good buy today

Management had been laser-focused on growing users to its platform, adding 122 million net new active accounts in the past two years. But the company is making a meaningful pivot and will focus on engagement instead of increasing its total user count.

This shift in focus is because only about one-third of PayPal's customers drive a vast majority of its volume. Since PayPal makes money on transactions, it makes sense to focus on those customers that use its platform the most. According to CFO John Rainey, the company could continue spending and increasing new users, but it does not believe that this is the best way to achieve long-term financial goals.  

The company has also taken a bite out of the buy now, pay later (BNPL) industry with its own product offering. In September 2021, it announced it would acquire Paidy, a Japan-based BNPL platform, to bolster its BNPL offerings.  It processed 54 million of these loans across 1.2 million merchants during the year.  

The recent sell-off has cut PayPal's valuation drastically, and the company is trading near its lowest valuation since going public in 2015. It trades at a price-to-earnings ratio (P/E) around 29, while its forward P/E is only 22. This valuation actually makes PayPal cheaper than Visa and Mastercard, which sport P/E ratios of 36 and 42, while fellow fintech Block trades at a P/E ratio around 95.

Despite management's cautious approach to future guidance, I think PayPal has become an attractive buy at these prices. The company is still slated to grow at a double-digit pace and continues to be a leading payments platform for the digital age. While the stock may be transitioning from a growth stock to a value stock, it looks like it is a solid buy here.