Where today PayPal-Act (WKN: A14R7U) states, no one would have thought that a few months ago. We are looking at a stock price of around $ 78. The record high of over $ 300 is really far away. Technical divestments, slower growth and the prospect of a weaker 2022 were the triggers for the divestment.
But for me, it is now also a good portion of exaggeration. Today, let’s take a look at PayPal stocks and where the stock may be in the next five years. Even conservative assumptions can show how cheap the stock is now.
PayPal stock: Next five years, very conservative
PayPal stock management has a very clear vision for 2022, which should provide a guide to our long-term outlook. According to the company’s forecast, management expects sales growth of between 11% and 13% by 2022. Without the eBay effect, growth would even have been between 15% and 17%.
I believe that an average revenue growth of 10% over the next five years can be realistic. Under this assumption, the price-to-sales ratio should fall to a value of just over 2. However, the question of how profits will develop is likely to be more crucial. The 2021 value of $ 3.52 is not achievable this year. Due to a more mixed transition year, earnings per. stock to be between $ 2.19 and $ 2.34 in 2022.
Nevertheless, I am convinced that above-average earnings growth should be possible in the medium term. Even a return to 2021 would mean a price-to-earnings multiple of 22 at the current stock price. However, my forecast is more that sales growth measured by the 2021s should lead to a moderate earnings growth of 5% pa at least in the next few years. Maybe more if management prioritizes profitable growth.
Under that premise, the PayPal stock would trade at just 17.5 times earnings in five years. However, this is a really conservative attitude for me. We must also not forget that the ecosystem is already very strong with a payment volume of over 1.2 trillion US dollars and almost 430 million users. There is absolute quality in the market for digital payment services.
Think long term!
With PayPal stocks, it makes sense to think long-term. My assumptions show that with the megatrend in digital payment services and because of the existing ecosystem, a very cheap valuation can be possible in just five years. For me, quality, value and actual growth are part of this past success story. Admittedly, it has lost much of its value in recent months and is even listed below the level of the Corona crash.
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Vincent owns shares in PayPal. The Motley Fool owns shares in and recommends PayPal Holdings.