PayPal (PYPL -1.80%) has been one of the more disappointing stocks on the market since the pandemic-era tech bubble burst in late 2021.
While the company is still recognized as a leader in digital payments, its growth has slowed significantly as the fintech industry matures and it faces competition from Apple, Block, and other challengers. It's also struggled strategically amid a leadership change, and cost cuts and share buybacks have done little to breathe new life into the stock.
However, one Wall Street analyst is now changing its tune on PayPal, and it could be a sign that PayPal is at the beginning of a turnaround.
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Mizuho calls PayPal a buy
With PayPal CEO Alex Chriss having been at the helm for nearly a year now, management's efforts to turn the business around may be finally starting to pay off.
Mizuho appears encouraged by this and raised its rating on the stock from neutral to buy, and gave it a price target of $90, implying an upside of 43% over the next 12 months.
The research firm upgraded its rating in part due to its new Fastlane product, a one-click checkout tool, that could add $1 billion to $1.5 billion in transaction margin dollars, money left over after processing transactions, in the medium term. Mizuho also noted that its branded checkout business is stabilizing.
Is PayPal a buy?
PayPal is still growing, but investors seem to want to see evidence that the business is stable enough to deliver steady long-term growth.
In the first quarter, total payment volume rose 14% year over year to $403.9 billion, but revenue rose just 9% and transaction margin dollars only rose 4%, showing the company's take rate is declining. While more evidence of a recovery would be nice to see, at this point the stock looks cheap enough at a price-to-earnings ratio of 16 to make opening a small position in it appear reasonable.
