PY PYPL PayPal Holdings, Inc. Loading... : Investor Sentiment and Bull/Bear Views

PayPal is down about 82% and is treated as a dying business, but it still has over 400 million active users, processes hundreds of billions in quarterly transactions, and throws off large cash flow. It is buying back about $6 billion of stock annually, reducing shares by 24% over five years, and returns on capital are improving. Free cash flow was $6.6 billion last year versus a $5.3 billion five-year average, and the stock trades at about 7.5x free cash flow. Revenue growth is slowing but not declining. Analyst EPS growth to $7.58 could support a roughly $150 stock at 20x in four years. DCF using 3/5/7% revenue growth, 14/17/20% free-cash-flow margins, 15/18/21x FCF, and a 9.5% desired return gives $80/$126/$190, implying 15-30% returns. The speaker owns PayPal and thinks it has the most potential of the three.

Cramer is not a fan of PayPal; despite liking what the new CEO may be doing, he views the business as too limited, says its 10x earnings multiple is not enough, and does not want to buy it merely on takeover hope when he would rather own Goldman Sachs.

The author argues PayPal is a value stock because it trades at a discount from its all-time high and at a low PE. The only stated rationale is the price discount and low multiple; no catalyst, mechanism or risk is provided, and no position is disclosed.