PayPal (PYPL) stock has clearly fallen out of favor with investors. The shares have shaved off 58% of their value over the past year.

The sharp decline has been a reflection of disappointing quarterly results, in which the digital payments giant’s growth has shown to be stuttering.

Morgan Stanley’s James Faucette says the “modestly” weaker-than-expected results of the past couple of quarters are down to a range of factors.

These include, “uneven/disappointing ecommerce growth from tough year-over-year comparisons, the Omicron-variant, inflation, supply chain disruptions, and stimulus impacts.”

Indirect hits to consumer spend due to the Russia-Ukraine crisis will most probably continue to impact ecommerce metrics in 1Q22.

However, while Faucette thinks patience is of the essence here, his long-term bull thesis remains intact. “With eventual ecommerce normalization, we think the market will better appreciate the strong underlying fundamentals of PYPL's business,” the 5-star analyst wrote.

Faucette’s comments come following a fireside chat with CEO Dan Schulman, at the banking firm’s annual TMT (Tech, Media, and Telecom) Conference.

There, Schulman made reassuring noises on the fundamental drivers of the business, such as average revenue per user, gross user additions, engagement growth and additional e-commerce and digital wallet share gains.

Schulman also highlighted the increasing use of the platform; customers were using PayPal 17 times per year when he joined the company 7.5 years ago, but that has risen to 45 times per year now. The CEO attributed the increase to newly rolled out services such as BNPL (buy now, pay later).

There are also other reasons to believe shopping at PYPL merchants should continue to increase. Along with growing merchant acceptance, these include Venmo’s upcoming addition to Amazon, offline channels’ (iZettle) recent growth, the ability to pay bills and crypto payments.

“This, combined with broader financial service offerings such as high-yield savings accounts and the potential for more BNPL financing products position PYPL to show good compounding growth of 20% growth exiting 2022,” the analyst summed up.

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Good news for PayPal, then, but what does it all mean for investors? Acknowledging the strength of the company’s forward plans, Faucette rates PayPal shares an Overweight (i.e. Buy), and his $190 price target suggests an upside of ~93% for the year ahead. (To watch Faucette’s track record, click here)

Overall, 37 analysts have recently reviewed PayPal’s prospects, of which 26 say Buy, 10 recommend to Hold and 1 implores to sell, all adding up to a Moderate Buy consensus rating. The average price target is hardly less bullish than Nowak allows; at $182.36, the figure suggests shares will climb 85% higher in the year ahead. (See PayPal stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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