The shares of PayPal Holdings (PayPal shares - ticker PYPL) fell 8,5% last week, ending an incredibly dire first half of 2022. In fact, this is officially the worst first half of a year since 1970. The S&P 500 and Nasdaq Composite indices fell 20% and 29% respectively. By comparison, PayPal stock fell 62% in 2022 at the end of trading on July 1. Ouch!
There has been no specific PayPal news in the last week. The whole month of June, however, was dire as equities reacted to the US Federal Reserve's 0,75% rise in the short-term interest rate. Risk assets such as stocks tend to lose value as interest rates rise.
PayPal has been stuck in a downward spiral all year, with a drastic slowdown in its growth rate. With the reopening of the economy, e-commerce spending went from a boom period to something much more pedestrian. The fintech firm continues to expand, steadily increasing its user base and making its apps, such as Venmo, a more commonly used payment method, but evidently the company has missed the signs that its financial spikes should have. suffer a slowdown. Shareholders were dissatisfied.
What will happen now?
For better or for worse, the Fed is expected to raise interest rates again at its upcoming July and September meetings, while continuing to fight inflation. Bringing commodity prices back under control is obviously a top priority for the long-term health of the economy, but meanwhile, stocks like PayPal are suffering.
At this point, however, PayPal is as cheap as it has ever been since it was spun off from eBay (EBAY 2,93%) in 2015. The shares are trading at just 17 times the free cash flow of the trailing period. 12 months and 18 times the expected profits for the current year. Investors now need to consider whether they believe PayPal can overcome this hurdle in the digital economy and maintain its expansion. Competition is fierce in the digital payments industry, but PayPal also has some of the most recognizable applications out there. If the company manages to recover over the course of this year or next, it could be a great buy in fintech stocks right now.