What happened
Shares of PayPal (PYPL +2.79%) were decidedly positive on Monday, jumping as much as 4.8%. As of 12:20 p.m. ET, the stock is still up 4.5%.
While the broad market move higher no doubt added to its momentum, the catalyst that sent the fintech pioneer higher was positive analyst commentary.
NASDAQ: PYPL
Key Data Points
So what
Mizuho analyst Dan Dolev has been crunching the data measuring web traffic between PayPal and the company's major U.S. merchants. He concludes that trends have stabilized over the past several months, suggesting that the company's growth may have turned the corner. Dolev notes the evidence is particularly pronounced with regard to mobile web traffic, an area where PayPal is most susceptible to competition from Apple Pay, which makes it easy to complete an online transaction on the iPhone.
Dolev reviewed checkout information from PayPal's largest merchant partners, including Etsy, Home Depot, and Nike. The data reveals that PayPal's market share of the payment transactions has leveled off in recent months after consistent declines in 2021 and early 2022. "While this is only one perspective," Dolev wrote, "we believe it could help improve sentiment."
The analyst maintained his buy rating and $105 price target on PayPal, which suggests potential gains for investors of 41% compared to Tuesday's closing price.
Now what
PayPal's stock has been in free fall for much of the past year, driven lower by slowing account growth, the bear market, and tough comps to lockdown-induced gains. Yet this negative sentiment appears to have gone too far, creating an opportunity for long-term investors.
The company is well entrenched in the digital payments space, with more than 432 million active accounts -- including 35 million active merchant accounts. Furthermore, other factors including an uncertain economy, foreign currency headwinds, and its highly publicized untangling from eBay have taken a toll -- but each of these issues is temporary.
Finally, at just roughly 2.5 times next year's sales, PayPal is sporting the lowest price-to-sales ratio in the company's history. The stock could still go lower, but this seems like a buying opportunity to me.
