As more people switch to online shopping, safe, secure, and easy payment methods have become essential. PayPal Holdings (PYPL), a fintech company known for its user-friendly platform and buyer protection features, has emerged as the preferred option among users worldwide. Its global reach now extends to over 200 countries, offering services in 25 currencies.

Macroeconomic pressures clobbered most fintech stocks last year, pulling PayPal’s stock down by 13.8% in 2023, compared to the S&P 500 Index’s ($SPX) gain of 25%. 

However, the company's transaction volumes continued to grow, boosting revenue and earnings. Let’s look at three takeaways from PayPal’s fourth-quarter and full-year 2023 earnings to determine if the stock is a good investment now. 

PayPal Regains Its Footing 

Since its separation from eBay in 2015, growth has been slow for PayPal. Furthermore, macroeconomic headwinds and geopolitical tensions amplified its problems last year. Despite these challenges, the company demonstrated resilience. While growth has been slow, the company's revenue is still increasing - just not at the same rate as before. 

For context, revenue in 2023 increased by 8% year-over-year to $29.7 billion, compared to 8.4% growth in 2022 and 18.7% in 2021. At the end of the year, PayPal had 426 million total active accounts.

In the fourth quarter, the company generated adjusted earnings per share (EPS) of $1.48, up 19% from the previous year's quarter. Earnings for the full year increased by 24% compared to 2022. 

New Leadership at PayPal Could Drive Growth

PayPal announced in August 2023 that Alex Chriss would take over as CEO and President, succeeding Dan Schulman. In November, the company also announced three new additions to its senior leadership team.

While a sudden change in C-suite leadership is often viewed with caution, it may also serve as a positive catalyst for the company. A new management team brings with it fresh experience and the ability to develop innovative growth strategies. On the Q4 earnings call, the new CEO stated that, in addition to the talented leaders who have grown with the company, PayPal now has a “world-class leadership team in place to help the organization reach its full potential.”

2024: PayPal’s Year of Execution 

On Jan. 25, PayPal announced six new innovations that will be implemented this year using artificial intelligence (AI). PayPal intends to focus on driving profitable growth in Branded Checkouts, its PSP (payment service provider) services, and its own PSP service, Braintree, by 2024. The company has redesigned its branded checkout process by integrating passkeys with face recognition or fingerprint recognition software, making the checkout process simpler and faster for shoppers.

It also introduced FastLane, a one-click guest checkout process that stores all customer information and can be accessed with a single tap during checkout. The company believes that FastLane will eliminate the time-consuming process of signing in and entering credit card information each time. FastLane was tested during the pilot phase, and it reduced checkout time by up to 40%. 

Plus, PayPal has rolled out smart receipts, which will use AI to assist consumers in not only tracking their purchases, but also receiving suggestions for future purchases. In addition, the company is launching the PayPal Advanced Offers Platform, reinventing the PayPal app, and launching Venmo's next-generation business profiles. 

Furthermore, PayPal believes the company's size has contributed to its slow growth. Management has decided to reduce the global workforce by 9% this year to cut costs.

PayPal went through a transition period in 2023, during which the company focused on cost-cutting and strategic deals to improve its future prospects. New CEO Alex Chriss stated, "2024 is a year focused on execution to position PayPal for long-term success."

While the transition may take some time to take effect, it could help PayPal get back on track as e-commerce and digital finance evolve.

With a conservative outlook for 2024, management expects adjusted EPS of $5.10 per share, consistent with 2022 EPS. Meanwhile, analysts predict a 0.44% increase in earnings to $5.12 per share, with a 6.8% increase in revenue. However, revenue and earnings are expected to increase by 8.1% and 10%, respectively, in 2025.

What Is Wall Street Saying About PayPal Stock?

Analysts appear cautiously optimistic about PayPal stock, rating it as a "moderate buy" overall. The majority - 23 out of 39 analysts covering the stock - rate it as a "hold," 14 as a "strong buy," and two as a "moderate buy." 

The mean target price for the stock is $72.23, which is 23.9% higher than current levels. The stock's high target price of $103 implies a 76.6% potential upside over the next 12 months.

Currently, PayPal trades at 11 times forward earnings, compared to its five-year historical price-to-earnings average of 50x.  Comparatively, its industry peer Block (SQ) is currently trading at 35 times forward earnings.

Slowing growth may have caused investors to lose interest in the stock. Nonetheless, its reasonable valuation provides a buying opportunity for those who believe PayPal's fortunes will improve in the coming years.

The Bottom Line on PYPL Stock

PayPal is well-positioned to benefit from the exponential growth of e-commerce. However, growth may be slow as the company transitions and tackles the headwinds. Nonetheless, I believe PayPal stock may be a wise long-term investment in a world that is rapidly digitizing.