Take advantage of the war on cash by buying shares in this Fintech giant today

Equities, especially technological ones, have had a turbulent 2022 so far. The Nasdaq Composite, down 26% so far this year, has had its worst start in a year in the index’s history. It is not very difficult to understand why – inflation recently rose to a 40-year high, the Federal Reserve raises interest rates sharply in response, and a host of negative effects from the Russo-Ukrainian war have shattered investor sentiment across the globe. However, volatile times provide fantastic investment opportunities for long-term investors.

As short-term noise continues to dominate the fundamentals of so many great companies, wise investors should aim to take advantage of the ongoing technology correction. Financial technology (fintech) shares, which belong to technology companies that strive to disrupt the traditional financial industry, are in the same boat as the rest. But as the war on cash continues to heat up, many of these companies seem well positioned to return in the long run.

Here’s a leading fintech stock that investors should not hesitate to throw over right now.

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PayPal is a world leader in the fintech arena

Mobile payment giant PayPal Holdings (PYPL 1.93%) has fallen more than 60% so far this year. After publishing an unimpressive earnings report to limit 2021, the fintech leader managed to deliver an in-line performance for the first quarter to start 2022. Total sales rose 7.5% year-over-year to $ 6.5 billion, and adjusted Earnings per share retreated 27.9% to end at $ 0.88. The company’s adjusted non-GAAP (generally accepted accounting principles) operating margin also fell by 700 basis points to 20.7%.

The weaker-than-expected growth for PayPal can be attributed to a number of challenges. Not only does the company have to deal with strong comparable calculations from a year ago and less than ideal macro conditions, but it also experiences top-line pressure from eBay‘s (EBAY 1.54%) transition to own payment platform. Management expects to stop adjusting for eBay by the end of this year, which should be interpreted as positive news by investors.

For the full fiscal year 2022, Wall Street analysts estimate that the company’s total sales will increase 11.5% year-over-year to $ 28.3 billion, and its adjusted earnings per share will decline by 15.9% to $ 3.87. Next year, which is when comparable calculations will normalize and eBay-related challenges will ease, analysts expect earnings and earnings per share to increase by 16.2% and 24%, respectively.

A long-term mindset is the key to investing in PayPal; The company’s 429 million active accounts and total payment volume north of $ 1 trillion in 2021 make it the most accepted digital wallet in North America and Europe. In the same way, it continues to diversify its business with new segments such as Venmo, a peer-to-peer payment platform, and Pay in 4, a service that allows consumers to pay for goods in four equal installments over a specified period of time.

The company is evolving into a cash-generating machine that has produced $ 4.9 billion in free cash flow (FCF) over the past 12 months. Today, the share is traded at approximately 24.2 times earnings, which represents a steep discount on the five-year average of 57.2. PayPal’s historically low valuation, combined with the paradigm shift towards a cashless economy, gives investors a healthy safety margin at the moment.

PayPal will come back in the long run

Unlike many fintech companies today, PayPal is a very profitable business that has generated free cash flow with a quick cut. Short-term headwinds have caused the mobile payment giant to trade at record low levels, which indicates that it is now an optimal buying moment for wise investors. The war on cash is in full swing, and PayPal is at the epicenter of the industry.

Between its first-class core business and new segments, the company seems well equipped to monetize this secular trend. In my opinion, patient investors who buy this stock today can be greatly rewarded down the road.