3 Stocks Down 70% or More That Could Climb Back to $100 Per Share in 2025

While many investors are familiar with the consumer-facing side of PayPal’s business, the company also has a thriving enterprise-facing business. This includes unbranded checkout services through its Braintree product. In other words, some merchants use PayPal’s Braintree to power digital transactions, but the PayPal brand isn’t displayed on the consumer side.

Braintree has driven a lot of growth for PayPal in recent years but at the expense of profits. The chart below shows how free cash flow growth trailed revenue growth significantly until recently.

In short, PayPal shook up its leadership in 2023, and the new management team is renegotiating many of Braintree’s contracts to support better profit margins. Now, margins are improving, and the company doesn’t seem to have lost customers, which suggests that PayPal is far more relevant than a lot of investors give it credit for.

With ongoing profit-margin improvements, PayPal can build on its healthy gains from 2024.

Of these three stocks, Etsy has the biggest climb to reach $100 per share, considering it trades at just $53. In other words, it needs to jump a whopping 88% from here. That makes Etsy the biggest longshot of the bunch, but in my view, such a rally isn’t an entirely outrageous proposition for the stock.

Consider that Etsy trades at just 10 times its free cash flow — this is really cheap. In fact, Etsy stock could trade at $100 per share right now and still be reasonably valued from a free-cash-flow perspective. But its valuation is depressed because investors have little confidence in the business.

It’s hard to blame them. Etsy is struggling to find new buyers — its active buyers actually dipped slightly in the third quarter of 2024. Moreover, the company’s gross merchandise sales are also falling.

But it’s not all doom and gloom for Etsy. The company’s Q3 revenue continued to rise 4% year over year thanks to an improved take rate. Management is also getting more disciplined, improving revenue per employee and revenue growth relative to what it’s spending on product development.

Furthermore, the company has a plan to drive more spending from active buyers with a new loyalty program, among other ideas. In short, buyers are already online spending money elsewhere. If they start spending more on Etsy’s platform — perhaps with gifting — then the business can grow again.

I believe these investments will start paying off for Etsy in 2025. And when investors realize what’s happening, they could quickly move to pick up shares of this undervalued stock, sending the price higher.

Among this trio, Roku is likely the riskiest pick because of its ongoing net losses, while PayPal offers the smallest potential upside because it’s quite large already. That leaves Etsy as the best balance between risk and reward.

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Jon Quast has positions in Etsy and Roku. The Motley Fool has positions in and recommends Etsy, PayPal, and Roku. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2025 $85 calls on PayPal. The Motley Fool has a disclosure policy.

3 Stocks Down 70% or More That Could Climb Back to $100 Per Share in 2025 was originally published by The Motley Fool