By Zack Pelosky
Our first stock choice for the October Issue is PayPal (NSDQ: PYPL)
PayPal has endured a sharp decline over the past year. Investors have seen the firm as a bearish opportunity due to 1) The Crypto Correction and 2) Inflation.
Because of the lack of positive market sentiment in Bitcoin, Ethereum, Tether, and other cryptocurrencies, platforms that broker crypto, such as Coinbase (COIN), have been slammed (-75.35% YTD) with low buying volume and panicking (bearish) investors. In the past year, Paypal has been lumped in with these crypto platforms as PayPal offers many of the same services. However, the majority of earnings come from commissions on online transactions resulting in PayPal being critically undervalued.
The second reason investors have undervalued Paypal is rising inflation. With inflation on the rise, spending has decreased, leading to less opportunity for commission. However, inflation has been more than factored into the price as PayPal has fallen over 55% YTD. Furthermore, as inflation starts to settle, spending should increase in the coming months and years.
PayPal and its subsidiaries, such as Venmo, are also incredibly popular amongst Millennials and Gen-Zers as it is significantly more convenient and environmentally sustainable than tangible credit cards and cash. According to PwC, the number of cashless transactions is expected to increase by over 200% by 2030. This will most likely propel a rise in PayPal’s electronic payment platforms. In Q1 2022, PayPal added 2.4 million new accounts and is expecting 10 million more by the end of 2022.
Finally, the cashless movement has made significant headway as being much more sustainable than traditional cash and coin currencies.
Considering PayPal has bought up all competition (Venmo) and is the leading online transaction platform, PayPal is primed for a more than solid recovery.