We are nearing the finish line in a decent year for the stock market. The S&P 500 has performed reasonably well, as have many equities that were beaten down last year. But before 2023 is over, let's remember that some stocks are still struggling.
Among them are corporations that can perform well in the next decade and are, therefore, excellent buys at their current levels. Let's look at two examples: PayPal Holdings (PYPL 2.90%) and Fiverr International (FVRR 3.74%). Read on to find out why these stocks are worth holding on to.
1. PayPal
PayPal isn't at its best. The fintech specialist is still dealing with comparatively low user growth (that is, compared to the earlier pandemic days) and stiff competition in the industry. The 20% stock decline over the past 12 months reflects these realities, but the sell-off may have gone too far.
PayPal's financial results, solid business, and valuation are compelling reasons to buy the stock.
First, turning to the company's results, it continues to make substantial headway with its revenue, total payment volume, and net income.
All three metrics saw decent progress in the second quarter. For instance, adjusted net earnings per share jumped by 24% year over year to $1.16.
Second, PayPal's business has several units that cater to consumers and businesses. The company offers seamless digital checkout experiences to shoppers, a peer-to-peer payment app for friends and family called Venmo, and payment solutions for businesses through Braintree. PayPal is among the leaders in all three categories and benefits from a network effect.
Consider its online checkout solutions. The more online retail stores carry PayPal as a payment option, the more attractive a platform it becomes to consumers. In other words, its acceptance -- and overall success -- will grow with use, a good thing since the fintech industry still has lots of growth left in the coming decade. Lastly, PayPal's forward price-to-earnings (P/E) ratio is just 11.6 as of this writing.
This seems more than reasonable for a company with the kinds of prospects available to PayPal. For comparison, the average forward P/E for the S&P 500 currently tops 19.1. Predicting how things will unfold in the next 12 months is challenging (or impossible). It could remain out of favor with investors for a bit longer.
But those looking at the next 10 years and beyond shouldn't miss this opportunity to scoop up the company's shares on the dip.
2. Fiverr
Fiverr, a leader in the gig economy, is facing some of the same problems as PayPal. While business was booming in 2020, things have changed drastically since, and Fiverr's stock has been on a free fall for a while. The company's financial results haven't been stellar, but they are improving. In the second quarter, Fiverr's revenue of $89.4 million increased by 5% year over year.
The number of active buyers on its platform remained flat at 4.2 million. Spend per buyer jumped 2% compared to the year-ago period, landing at $265. Fiverr did achieve net income in the second quarter, which came in at $0.01 per share, compared to the net loss per share of $1.13 reported in the prior-year quarter.
The black ink on the bottom line is a good sign for Fiverr. It has been trying to cut expenses, initiatives that are paying off. That's just one reason to be optimistic about the company's future.
We can also consider that the gig economy is here to stay. Fiverr helps connect freelancers and businesses that need their expertise. Each side of this transaction benefits from the company's platform.
Businesses can quickly find and vet dozens of potential experts, choose whoever seems to be the best option, and get projects done without going through the hassle of hiring an employee eligible for a host of expensive benefits. Meanwhile, freelancers can advertise their services on the platform, an easier and faster method than building a website from scratch.
That's why the gig economy will only continue on its forward path. Fiverr also benefits from the network effect, as businesses and freelancers will increasingly seek one another on its website.
And as for valuation, the company's current forward P/E is a reasonable 13.5. All these factors make a compelling argument for investors to buy Fiverr's shares and hold on to them.
