Nasdaq Bear Market: 1 Great Growth Stock You’ll Regret Not Buying When Falling

Persistent inflation and skyrocketing interest rates have convinced many investors that the economy is heading into a recession, and that fear has taken its toll on the stock market. The Nasdaq Composite It is currently down 22% from its high, putting the widely followed index in bear market territory.

From a short-term perspective, this reaction makes perfect sense. Higher prices will eventually put pressure on consumer spending, dampen demand for discretionary items and slow economic growth. But inflation is ultimately temporary, and the market has inevitably rebounded from every previous downturn. This means that the current situation is actually a good time to buy stocks.

With that in mind, PayPal Collectibles (PYPL 2.01%) It’s currently less than 68% off its high, and the stock looks too cheap to miss.

Strong position in the market

The PayPal brand is synonymous with digital payments. It operates a two-sided platform, offering products in which both businesses and consumers participate. This sets the company apart from many other payment processors, allowing PayPal to take advantage of consumer data to prevent fraud and surface shopping deals that increase merchant sales more effectively.

On one side of the ecosystem, PayPal enables businesses to accept payments, both online and in stores, and offers adjacent solutions for risk management, finance, and point-of-sale systems. On the other hand, PayPal offers payment cards and digital wallets that enable consumers to spend and save money, invest in cryptocurrencies, discover shopping ideas, and earn rewards.

The broad scope of its two-sided platform has helped PayPal become the most accepted digital wallet in North America and Europe. Even better, the company has built a trusted brand, and this reliability boosts conversion rates by 34% compared to other payment options. This makes PayPal a particularly compelling business partner, with which the company has recently won partnerships ShopifyAnd the kingsAnd the Rocco.

Turning to the financials, active PayPal accounts have grown 6% over the past year — and management expects that number to accelerate in the coming quarters — and transactions per active account have increased by 12%, indicating an increase in engagement. As a result, revenue rose 9% to $6.8 billion, and free cash flow rose 22% to $1.3 billion.

Big market opportunity

PayPal puts the total addressable market (TAM) at $110 trillion, but the company handled only $1.3 trillion of total payment volume over the past year, which is about 1% of TAM. This leaves plenty of room for future growth, and PayPal should take advantage of many catalysts in the coming years.

First, online shopping is becoming more and more popular, and this trend will naturally lead to the growth of digital payments. Second, the number of digital wallet users is expected to double between 2021 and 2025, according to Juniper research. At the same time, digital wallets will continue to gain market share of cash and payment cards in North America and Europe, both in stores and online, according to data from Worldpay. And third, PayPal’s management team is implementing a robust growth strategy.

In particular, the company plans to focus on three opportunities: PayPal and Venmo digital wallets, PayPal Checkout, and Braintree, a more customizable payment solution aimed at larger e-commerce businesses. Management believes the strategy will drive an operating margin expansion that begins in the fourth quarter of this year and continues through 2023.

In short, PayPal is taking advantage of its strong market position and massive market opportunity, and profitability is expected to accelerate in the coming years. Additionally, the stock is currently trading at 4.2 times sales — a huge discount compared to the five-year average of 42.8 times sales. That’s why you’ll regret not buying this growth stock on a dip.

Trevor Jennewine has positions at PayPal Holdings, Roku, and Shopify. Motley Fool has positions at PayPal Holdings, Roku, and Shopify and recommends them. Motley Fool recommends the following options: long January 2023 calls worth $1,140 on Shopify and short January 2023 calls worth $1,160 on Shopify. Motley Fool has a disclosure policy.

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