Pete’s Pitch: Pay Attention to Paypal

Pete Najarian joined CNBC’s Fast Money on Wednesday Night to make his pitch for why traders need to pay attention to the pioneer of electronic payments, Paypal ($PYPL). 

Paypal, founded in 1998 by a star-studded team of young tech titans including Palantir’s Peter Thiel and Tesla’s Elon Musk, has had an interesting history. It IPO’d in 2002 at $13 dollars a share and was quickly purchased by eBay. 

After three years, eBay spun off the company to its shareholders in 2015. Fast forward to modern day, Paypal’s market cap is $221.77 billion, more than 5.5x eBay’s $40 billion market cap. Clearly, the student has surpassed the master. 

Paypal’s Valuation

Believe it or not, that $221 billion market cap is a discount for the e-payment giant. Despite being up more than 1300% from it’s $13 IPO price, Paypal currently sits 40% below it’s all-time-high of $310 per share set this past July. Today, Paypal is sitting just under $190. The stock hasn’t traded this low since September of 2020, 14 months ago. It was this factor, among others, that led Pete Najarian to buy the dip. 

Sources: yCharts

Stacking Acquisitions

First, Pete cited the leadership and its ability to make meaningful acquisitions. In 2012, Paypal demonstrated this when they purchased Venmo for $800 million dollars. That might sound like a hefty bill. But looking back 9 years later, the investment was a slam dunk. 

Venmo generated more than their $800M price tag in 2021 alone. The Paypal subsidiary has also grown its annual payment volume from $2.3 billion in 2014 to $159 billion in 2020. Paypal estimates that Venmo’s valuation, on its own, is $38 billion. 

And that was before Paypal’s President Daniel Schulman came aboard. Since then, Paypal has acquired 17 other companies. This includes a massive purchase of e-commerce giant Honey for $4 billion dollars. 

Following the Smart Money

But strong leadership and a penchant for acquisitions isn’t Pete’s only reason for buying the dip in Paypal. Over the last 3 months, Paypal insiders have purchased over $2.7 million dollars worth of shares. That’s notable because Paypal insiders have NOT purchased shares at any other point this year. 

Paypal’s Fundamentals

Pete also cites a change in fundamentals. Paypal has about twice as much cash as it does debt. That’s favorable in comparison to some of it’s debt-ridden, high-growth brethren, especially in a rising-rate environment. 

Additionally, at the height of 2021, Paypal was trading at a P/E of 80. That made them expensive compared to a US IT Industry average of 36.6, and a market average of 17. Now, Paypal carries a forward PE of 35. This still isn’t “cheap”, but it’s much more favorable from a value standpoint. Pete went on to cite their 5 year rolling average of 36% growth. Consistent, growing revenue. And their continued investment in crypto through Paypal’s Wallet feature. 

Taking it to a vote

Pete’s opinion was supported by ALL THREE members of Fast Money. Karen Finerman, Tim Grasso and Tim Seymour all agreed with Pete that Paypal at this level. They weren’t the only ones: According to CNBC’s Fast Money Twitter poll, over 1800 twitter users (a 70% majority) agreed: Paypal is a buy.

VOTE NOW: Are you buying @petenajarian's pitch on $PYPL?

— CNBC's Fast Money (@CNBCFastMoney) December 15, 2021

Listen to what Pete and the rest of the Fast Money panelists had to say below.