PayPal tumbled 16% this week, but one top analyst is making a bullish long-term case for the struggling stock.
The company's underperformance follows leadership uncertainty. PayPal's chief financial officer, John Rainey, announced last week he'll leave the company in late May. Yet, Bruderman Asset Management's Akshata Bailkeri made an optimistic case for PayPal on CNBC's "Fast Money" this week.
The firm's equity analyst likes the stock for three reasons:
1. Post-pandemic sales could pick up
Bailkeri, whose firm owns PayPal shares, thinks sales will pick up in a post-pandemic world.
"We believe that the online percentage of these retail sales should pick up in 2023," said Bailkeri. "PayPal is a primary beneficiary of it."
2. Its spin-off from eBay is beneficial
She contends PayPal as a stand-alone company also bodes well for the stock. Even though its stock is lower now, PayPal shares reached all-time highs last July.
"EBay is no longer really an overhang," Bailkeri said. "The company has had significant growth even after spinning out of the company in 2015."
3. It's an attractive valuation over a five-year horizon
PayPal is trading at a significant growth-adjusted discount versus its competitors, according to Bailkeri. She sees the stock's volatility as a buying opportunity for gains over the next five years.
"You're looking at long-term online trends and movements from cash to cashless growing," she said. "That's more reflective in a five-year view than maybe in the next couple quarters."
Where PayPal is heading
Overall, Bailkeri expects double-digit percentage returns for PayPal over the next five years due to strong secular trends.
"People are going to continue to shop more online and have more payments that are in the digital space," she said.
PayPal, which reports earnings on Wednesday, is down 26% so far this month.