PayPal HoldingsNASDAQ: PYPL

The company still trades far below intrinsic value with a large margin of safety despite the stock's run-up and accounting for a slowdown in growth. Trading slower growth in the short term for a better margin profile is healthy and beneficial to the business, and we can already see the results. By accounting for the risks associated with the ad segment but not including the benefits, we are essentially receiving all the upside from it when it launches for free.

Investors were not impressed with PayPal's predictions, even though the company raised its forecast again.

The company has done quite well in 2024.

PayPal's stock was doing well, but its rise came to a sudden halt because of mixed results for the third quarter. The company fell short of revenue expectations mainly because of a shift in its pricing strategy. On the bright side, total payment volume, earnings, and share buybacks are all at all-time highs.

PYPL benefits from its growing range of services and a solid network of partners. However, its short-term outlook is affected by difficult economic conditions.

I maintain a 'Buy' rating for PayPal, setting a fair value of $96 per share due to its impressive growth in payment transactions and profits. Important partnerships and a rise in Buy Now, Pay Later options are improving PayPal's commerce platform and broadening its ecosystem. The Fastlane service is also becoming popular, with more than 1,000 merchants using it and large companies starting to join, indicating potential for future growth.

PayPal's Q3 report revealed mixed outcomes, featuring solid earnings per share growth but stagnant revenue and disappointing predictions for the holiday season, leading to fluctuations in its stock. The company showed better fundamentals, such as more transactions per active account and strong cash flow, even with slow revenue growth. PayPal's bold strategic partnerships set it up for future growth, with encouraging advancements in branded checkout and monetizing Venmo.

PayPal's stock has increased by 37.56% since July, thanks to new CEO Alex Chriss and important partnerships, indicating a positive change for the company. In the third quarter, their earnings exceeded expectations by more than 12%, even though revenue was slightly lower, highlighting steady growth and a commitment to quality. Collaborations with major companies like Amazon, Shopify, and Apple strengthen PayPal's market presence and reduce competition risks.

The market's first response to PayPal's Q3 2024 results appears reasonable, especially considering the guidance for the next quarter. Besides the Q4 forecast, the number of active users is increasing again each quarter, and profit margins are getting better. PayPal is still priced well compared to its competitors and in terms of free cash flow.