PayPal Holdings, Inc.

PYPL Details

PayPal Holdings, Inc. (NASDAQ: PYPL) is a global technology company that provides platform and digital payments services that allow consumers and merchants to make and receive payments, withdraw, and transfer funds from bank accounts, and hold balances in its proprietary accounts in various currencies. Its revenue is divided into two categories: 1) Transaction Revenues, which are fees charged to users for the Total Payment Volume (TPV) of each completed transaction on its platform; 2) Revenues from other value-added services, such as partnerships, referral fees, subscription fees, gateway fees, and other services provided to users.

Latest News:

• Facilitating Wix Merchants with Pay Later Offerings: On December 01, 2021, PYPL announced that Wix retailers could provide PayPal Pay in 4 instalments and PayPal Credit through a dedicated Pay Later checkout button and present Pay in 4 messaging earlier in the purchasing process. PayPal Pay Later options give Wix eCommerce merchants in the US yet another way to make the most of this crucial time of year.

FY21 Results:

• Double-Digit Growth in Topline: The company reported a YoY growth of 18.26% in overall revenue to USD 25.37 billion in FY21 (ended December 31, 2021) from USD 21.45 billion in FY20, attributable to growth in Net New Active Accounts and TPV.
• Reduction in Profitability: In FY21, PYPL's net income dropped to USD 4.17 billion from USD 4.20 billion in FY20.
• Cash and Debt Position: As of December 31, 2021, the company had cash and cash equivalents (including short term investment) of USD 95.0 billion and total debt of USD 8.05 billion.

Key Risk:

• Competition Risk: PYPL operates in a highly competitive global payments industry, and any advanced innovation or superior product development by its competitors could harm its operations.
• Regulatory Risk: PayPal's business is subject to strict federal and state regulations. As a result, stricter regulatory oversight could impair its profitability.

Outlook:

• FY22 Guidance: As of FY21, PYPL expects to achieve YoY growth of ~15% - 17% on a spot rate and FX-neutral (FXN) basis. It also estimates an EPS of about USD 2.97 – 3.15 and USD 4.60 – 4.75 on a GAAP and Non-GAAP basis, respectively, along with a Free Cash Flow of ~USD 6.0 billion.
• Q1FY22 Guidance: PYPL anticipates ~6% growth in revenue on a spot and FXN basis to approximately USD 6.4 billion. It also expects non-GAAP EPS of ~USD 0.87 in Q1FY22.

 Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

 Stock Recommendation:

PYPL's stock price has fallen 54.90% in the past six months and is currently leaning towards the lower band of its 52-week range of USD 123.85 to USD 310.16. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 153.94.

Considering the significant correction in the stock price, decent financial performance, solid margins, positive outlook, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 126.08, up 1.43% as of February 04, 2022.

Three-Year Technical Price Chart (as on February 04, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

UiPath, Inc.

PATH Details

UiPath, Inc. (NYSE: PATH) creates an end-to-end automation platform that includes user emulation. Its platform is intended for employees within an organization to handle a wide range of use cases, from simple activities to long-running, complex business processes. It generates revenue by selling licenses to its proprietary software, maintaining and servicing those licenses, offering access to specific products (software as a service, or SaaS), and providing extra services such as professional services. 

Latest News:

• Assisting Federal Agency: On February 1, 2022, PATH stated that the Internal Revenue Service, a US federal government revenue service, is enhancing its technology using software robots to manage its finance and procurement tasks better.
• Collaboration with Deloitte: On January 25, 2022, PATH announced that it had become a Builder sponsor of The Smart Factory at Wichita, a new Deloitte Industry 4.0 immersive experience center. The company will highlight the significance of robotic process automation (RPA) in the future of intelligent factories while engaging a diverse range of organizations in advanced manufacturing advances and the technologies that power them.

Q3FY22 Results:

• Boost in Revenues: Due to an increase in sales across all categories, the company reported a 49.92% rise in total revenue to USD 220.82 million in Q3FY22 (ended October 31, 2021) compared to USD 147.29 million in Q3FY21.
• Improvement in ARR: PATH's annualized renewal run-rate (ARR) increased by 57.87% in Q3FY22 to USD 818.41 million from USD 518.40 million in Q3FY21.
• Strong Balance Sheet: As of October 31, 2021, the company had cash and cash equivalents (including short-term investments) of USD 1.88 billion and no outstanding debt.

Key Risks:

• Customer Concentration Risk: The top 10% of customers account for a sizable portion of the company's revenue and ARR. Any of the company's significant customers could choose to buy less than they have in the past or opt not to license its platform and products, resulting in a decline in revenue and ARR and a negative impact on its operations.

Outlook:

• Q4FY22 Estimates: As of December 8, 2021, PATH forecasts Q4FY22 ARR to be in the range of USD 901 – 903 million, with revenue around USD 281-283 million. Non-GAAP operating income is estimated to be USD 10-20 million. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

PATH's stock price has fallen 44.97% in the past six months and is leaning towards the lower band of its 52-week range of USD 31.47 to USD 90.00. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 42.24.

Considering the company's growth prospects, a rise in ARR, strong top-line performance, recent collaborations, healthy balance sheet, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the current price of USD 34.70, up 4.02% as of February 04, 2022, 1:38 PM ET.

Three-Year Technical Price Chart (February 04, 2022, 1:38 PM ET). Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Beyond Meat, Inc.

BYND Details

Beyond Meat, Inc. (NASDAQ: BYND) is a plant-based meat company that creates burgers, sausage, ground beef, and poultry. It generates meat entirely from plants, a breakthrough that lets customers enjoy the taste, texture, and other sensory features of popular animal-based meat products while also benefiting the environment. As of September 2021, its products were available in over 128,000 retail and foodservice establishments throughout 85 countries.

Latest News:

• Collaboration with Pizza Hut: On January 10, 2022, Pizza Hut and BYND have announced the availability of plant-based Beyond Italian Sausage Crumbles in all Pizza Hut Canada locations. Beyond Italian Sausage, Crumbles come in three delightful Beyond Meat® recipes and are designed to mimic the meaty texture and mouthwatering savory flavor of Pizza Hut's traditional Italian pork sausage. This summer, after a successful trial in Toronto and Edmonton, these new Pizza Hut menu items are back by popular demand.

9MFY21 Results:

• Growth in Revenues: BYND reported YoY growth of 19.41% in 9MFY21 (ended October 02, 2021) to USD 364.02 million compared to USD 304.85 million in 9MFY20 (ended September 26, 2020), attributable to the expansion of overall distribution, accelerated orders, and contribution from newly introduced products.
• Increase in Losses: The company’s net losses increased to USD 101.73 million during 9MFY21 from USD 27.68 million reported during 9MFY20 due to a significant increase in operating expenses.
• Cash and Debt Position: As of October 02, 2021, the company's cash and cash equivalents stood at USD 886.44 million, with total debt (including finance lease liabilities) of USD 1.13 billion.

Key Risks:

• Dependence on Third Parties: BYND has entered into a multi-year plant-based protein sales agreement with one of its third-party pea protein suppliers, requiring it to purchase minimum monthly and semi-annual volumes throughout the duration. Any disruption in the supply of pea protein or other raw materials could have a significant negative impact on its business if it cannot replace these sources quickly.

Outlook:

• Q4FY21 Estimates: As of Q3FY21, BYND expects to generate net revenues in the range of USD 85 – 110 million in Q4FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

BYND's stock price has fallen 52.63% in the past six months and is currently leaning towards the lower end of its 52-week range of USD 53.10 to USD 183.75. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 71.29.

Considering the significant correction in the stock price, dominant player in plant-based protein products industry, recent collaborations, positive outlook, associated risks, and current valuation, we recommend a "Buy" rating on the stock at the closing price of USD 58.68, up 1.16% as of February 04, 2022.

Three-Year Technical Price Chart (as on February 04, 2022). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.