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PayPal: Can This Contrarian Bet Keep Gaining on Improving Fundamentals?

Published 11/12/2024, 10:35 PM
PYPL
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  • In a volatile market, patience and a contrarian view can yield significant rewards.
  • While many abandoned PayPal, a focus on fundamentals proved profitable.
  • Staying vigilant in shifting markets reveals new opportunities where others see risk.

In the recent market rally, the "risk-on" mood roared back, fueled by a surge of fear of missing out (FOMO) that drove investors toward riskier assets.

PayPal (NASDAQ: PYPL) joined this surge, closing just shy of $87 and reaching a key target I'd anticipated for months.

This wasn’t just another number to me; it marked a well-earned reward for taking an early position and holding on through a rollercoaster ride in sentiment and valuation.

PayPal Daily Chart

If you’ve followed my analyses, you’ll know I’ve often flagged PayPal as a contrarian opportunity, even while many investors were steering clear. I put my conviction to work with a sizable position of 400 shares at an average cost of $68.75.

When Patience Pays Off Handsomely

Yet, patience wasn’t always easy. When the stock drifted down to the $50 range and hovered in the $60s, I added to my position, backing my analysis with more capital.

Many investors began to mock the stock, calling it “PainPal” to reflect their frustration and doubt. But in this game, you learn that prices drive the narrative: PayPal at $50 felt scorned and overlooked; should it hit $100, suddenly, it’s a “next-gen leader.”

But instead of letting the price dictate my sentiment, I focused on PayPal’s fundamentals.

The company had a few key factors that signaled long-term potential: it was executing an aggressive share buyback at favorable prices, with a free cash flow of $5-6 billion that could conceivably buy back its entire market cap in a decade.

Valuations were attractive, growth was still there (albeit modest), and, to me, the management changes were the missing ingredient. Alex Chriss’s leadership brought new momentum, with a strategic focus on profitability and innovation that I believed would support a future rebound.

Yesterday’s rise validated that thesis, allowing me to close my position for a hefty profit, selling gradually as PayPal neared my target price.

Now, could there be more upside ahead for the stock? the fair value tool suggests so.

PayPal Fair Value

Source: InvestingPro

Bottom Line

It was another lesson in the power of contrarian investing and the rewards of patience.

Sometimes, the best opportunities emerge from stocks no one seems to want; buying when others are fearful, as Warren Buffett wisely advises, can make all the difference.

Looking ahead, I’m noticing fewer bargains in today’s U.S. market, where valuations are stretched across sectors.

But the fundamentals that drive long-term value remain as true as ever. It’s essential to stay active and ready, watching for the next opportunity that may arise from market swings or sentiment shifts.

If you’re wondering where to look next, every rally and correction brings new chances—you just have to know where to look in the market.

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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