Three reasons why this struggling fintech stock may break out of its crisis

PayPal fell 16% this week, but a top analyst puts forward a bullish long-term case for the struggling stock.

The company’s underperformance follows uncertainty in management. PayPal’s CFO, John Rainey, announced last week that he would leave the company at the end of May. Still, Bruderman Asset Management’s Akshata Bailkeri made an optimistic case for PayPal on CNBC’s “Fast Money” this week.

The company’s stock analyst likes the stock for three reasons:

Post-pandemic sales could increase

Bailkeri, whose company owns PayPal shares, believes sales will increase in a post-pandemic world.

“We believe the online percentage of these retail sales should increase by 2023,” Bailkeri said. “PayPal is a primary recipient of it.”

2. Its spin-off from eBay is beneficial

She claims that PayPal as an independent company also bodes well for the stock. Although the stock is lower now, PayPal shares reached record highs in July last year.

“EBay is no longer an overhang,” Bailkeri said. “The company has experienced significant growth, even after withdrawing from the company in 2015.”

It is an attractive valuation over a five-year horizon

PayPal trades at a significant growth-adjusted discount relative to its competitors, according to Bailkeri. She sees the stock’s volatility as a buying opportunity for gains over the next five years.

“You’re looking at long-term online trends and movements from cash to cashless growth,” she said. “It’s more reflective in a five-year outlook than maybe in the next few quarters.”

Where PayPal is headed

Overall, Bailkeri expects double-digit percentage returns for PayPal over the next five years due to strong secular trends.

“People will continue to shop more online and have more payments in the digital space,” she said.

PayPal, which reports earnings on Wednesday, has fallen 26% so far this month.

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