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Should You Buy PayPal (PYPL) Stock on the Dip?

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Shares of PayPal (PYPL - Free Report) sunk nearly 3% on Thursday morning amid what has otherwise been a stellar run for the online and mobile payments powerhouse. With no new stock-moving headlines to speak of, let’s take a look at some of the company’s current fundamentals to see if now might be a good time to buy this slight dip.

Latest Earnings Results

PayPal has moved higher since its latest earnings report in late January, so it is clear that investors liked what they saw.

PayPal’s Q4 revenue popped 26% to reach $3.74 billion, while adjusted earnings surged 30% to hit $0.55 per share. The company’s widely popular Venmo payment app saw an 86% jump in payment volume. PayPal also expanded its business into new international regions that have the potential to drastically increase revenues.

More Fundamentals

Looking ahead to the first quarter, PayPal is projected to see its revenues climb 20.3% to reach $3.58 billion, based on our current Zacks Consensus Estimates. PayPal’s top line is expected to grow at a similar rate the following quarter and hit $15.25 billion for the full-year, which would mark 16.4% growth.

PayPal’s Q1 and full-year earnings are projected to surge 22.7% and 20.5%, respectively. The payment firm is also expected to see it adjusted earnings expand at an annualized rate of 17.5% over the next three to five years.

But what could have caused today’s small sell-off?

One possible answer is that some of PayPal’s earnings estimates have been trending downward recently. Within the last 60 days, PayPal has earned six downward revisions against just four upward revisions for the first quarter.

On the other hand, earnings revisions have favored the upside 12 to two for PayPal’s current full-year within this same timeframe.

Investors should also note that PayPal seems to focus on satisfying earnings expectations, which is something growth-based firms can neglect. The company has beat earnings estimates every quarter since it split from eBay (EBAY - Free Report) , and a positive earnings surprise has sometimes resulted in an immediate surge in share prices.

PayPal Holdings, Inc. Price, Consensus and EPS Surprise

PayPal Holdings, Inc. Price, Consensus and EPS Surprise | PayPal Holdings, Inc. Quote

Value

PayPal doesn’t necessarily scream value, but when compared to the “Internet – Software” industry’s average P/E of 61.7, the company looks outstanding. PayPal is currently trading at 35.5x forward earnings, which also marks a massive discount compared to the 55x it traded at in the beginning of January.

PayPal is also currently trading at a discount compared to its new-age payment rival Square (SQ - Free Report) , which sports a Forward P/E of 123.8. This should please PayPal investors because both companies operate a similar service and have expanded far beyond their initial business models into new growth areas, so investors are able to get similar exposure with PYPL at a more attractive earnings multiple.

Bottom Line

PayPal continues to try to bolster the variety of financial services it offers, including its relatively new entry into the world of “Robo Investing.” The company also has partnerships with a wide range of industry giants, including Facebook , Baidu (BIDU - Free Report) , and JPMorgan Chase (JPM - Free Report) .

Now might not be a bad time to buy PayPal at a slight discount, especially considering its propensity to focus on earnings while it also expands into new growth areas.

Zacks Editor-in-Chief Goes "All In" on This Stock

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