5 Stocks that Will Bounce Back According to Reddit

3. Paypal Holdings Inc. (NASDAQ:PYPL)

Number of Hedge Fund Holders: 86

Paypal Holdings Inc. (NASDAQ:PYPL) ranks 3rd in our list of the stocks Redditors believe have the potential to rebound. Paypal Holdings Inc. (NASDAQ:PYPL) stock is down about 15% year to date. Paypal Holdings Inc. (NASDAQ:PYPL) was crushed after it was revealed that Elliott Investment Management exited the company in the second quarter. But Paypal Holdings Inc. (NASDAQ:PYPL) is cutting its costs significantly and buying back its shares. Paypal Holdings Inc. (NASDAQ:PYPL) recently announced a bold move by launching a stablecoin.

As of the end of the second quarter of 2023, John Overdeck and David Siegel’s Two Sigma Advisors own a $381 million stake in Paypal Holdings Inc. (NASDAQ:PYPL).

RiverPark Large Growth Fund made the following comment about PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q2 2023 investor letter:

“PayPal Holdings, Inc. (NASDAQ:PYPL): PayPal shares were a top detractor in the quarter despite reporting better than anticipated 1Q earnings and raising guidance for the remainder of 2023. Revenue of $7 billion grew 9% year over year, an acceleration from the prior year and quarter. EPS of 1.17 grew 33% year over year on better cost discipline leading to better operating margins. The disappointment was centered around weaker gross margins, as unbranded checkout, which has lower gross margins, accelerated faster than branded checkout. Management anticipates this trend to continue and therefore guided to lower gross margins for the remainder of the year. Despite the gross margin headwind, operating margins continue to expand due to expense discipline.

PayPal is the most accepted digital wallet – with almost triple the acceptance of Apple Pay, the number two digital wallet – providing the purest exposure to the secular growth in ecommerce-driven digital payments. PayPal is also a key beneficiary of consumer-to-consumer payment trends through its Venmo peer-to-peer (P2P) payment service. With a 1Q non-GAAP operating margin of 23%, PYPL also has significant margin expansion potential given that competitors Adyen, Visa and Mastercard have 50%-65% operating margins. We believe the combination of the secular growth of eCommerce and P2P payments, along with expanding operating leverage and the strategic use of the company’s significant and growing cash balance should fuel at least a high teens earnings growth rate over the next five years. This, to us, presents an excellent risk/reward given that PYPL trades at a below market multiple.”