The Paypal stock price has tumbled 40% from its July $310 high. Notably, this is the largest drop the fintech company has suffered since going public in 2015.

While many growth stocks have suffered similar trends this year, the Paypal stock is standing out for me as an intriguing buying opportunity. So should I add the stock to my portfolio today?

How the bears took control

What’s behind the Paypal stock price almost halving? Primarily, the company’s third-quarter earnings report was disappointing. Not only did it miss on revenue and earnings expectations, its guidance for FY2022 was underwhelming.

The company, long synonymous with eBay, is in a transition phase. This almost two decade long partnership has come to an end. Indeed, this is one reason for revenue and earnings growth slowing. Additionally, management cited fiscal stimulus ending and global supply chain issues as factors impacting the top and bottom line.

Another bearish element revolves around the growing ‘buy now pay later’ (BNPL) market. This year, Amazon and Affirm have partnered, giving Amazon customers the opportunity to split up the cost of applicable purchases into multiple payments. In addition, Block (formally Square) rocked the fintech world when it agreed to acquire ‘buy now, pay later’ provider Afterpay. Add to the mix Klarna aggressively growing its footprint in North America and Europe. Consequently, Paypal’s BNPL product is merely one of many.

But the Paypal stock price has never had a period quite like this and the chart below puts the last few months into perspective.

Paypal stock bull case

I sympathise with the bear case. Indeed, thinking short term, I would expect a bumpy ride and potentially more pain for Paypal shareholders. However, long term I see a lot to be excited about.

Firstly, Paypal may have split from eBay but it has expanded and deepened a number of exciting partnerships. Teaming up with Amazon to enable US customers to pay with Venmo at checkout is particularly exciting. Its also built relationships with Walmart, Booking.com, and Asos. There may be concerns over growing competition but Paypal boasts to be the most accepted digital wallet. Impressively, over 75% of the top 1,500 largest North American and European merchants offer Paypal at checkout.

Secondly, and unlike Square, Paypal didn’t need to make a big purchase to release its BNPL offering. Instead, it built it in house, making it available in Australia, France, Germany, the UK, US, Spain, and Italy. It has, however, made an interesting acquisition of Paidy to try to crack Japan, the world’s third-largest e-commerce market. There is huge growth potential here and not only because of its size. In Japan, 70% of digital commerce is still paid for by cash upon delivery.

Weighing it all up

While I don’t consider Paypal stock to be cheap, it has history of growing revenue and monthly active users. With the deals and relationships made over the last year, I expect growth to continue. Paypal could even be an inflation hedge as higher prices should increase revenues from processing payment volumes. I’m also interested to see how Paypal’s moves into cryptocurrency and rumours of a stock-trading platform acquisition develop. All things considered, I see this as an alluring long-term opportunity for my portfolio.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Nathan Marks owns Amazon. The Motley Fool UK has recommended ASOS, Amazon, Block, Inc., and PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shares in Stagecoach (LSE: SGC) have soared today, adding more than 9% at the time of writing this article. There is a simple reason for this surge in the Stagecoach share price. Below I explain the dramatic increase — and whether I think it is worth adding more of the shares to my portfolio at the moment.

Merger announced

Back in September, the bus company and its rival, National Express (LSE: NEX), announced they were in talks about a possible merger. Today the company revealed to the market the combination is now a firm plan.

In the announcement, the terms of the deal were set out. Stagecoach shareholders are in line to receive 0.36 of a share in the combined company for every Stagecoach share they own. That will leave them owning a quarter of the new company. Three-quarters will be owned by existing National Express shareholders. If things go according to plan, the deal will take effect around the end of next year. So, fittingly for a bus company, there is still a lot of road ahead for Stagecoach shareholders.

Why the Stagecoach share price jumped

When a takeover is announced, often the share price of the company being acquired moves on the market roughly to the proposed purchase price. Although today’s deal is being pitched as a merger, in effect it looks like a takeover of Stagecoach by National Express.

That is why Stagecoach shares have risen today. They have risen 8% since I wrote last week of the value I saw in Stagecoach for my portfolio. They are up 9% over the past year. National Express shares also rose today, although only around 2%. They stand around 1% below their price a year ago.

Further share price moves are possible

I reckon Stagecoach is an attractive company. The purchase price of £468m is well within the reach of rival bidders such as private equity groups. They may be attracted by Stagecoach’s strong brand and a business model which in many markets involves little competition. If another bidder makes an offer for Stagecoach, the share price could appreciate further.

I also think the deal could yet fall flat. There is a risk of competition concerns overriding the commercial logic for the combination. It also needs to be approved by shareholders. That can never be taken for granted. If the deal falls through, the Stagecoach share price could fall again. Meanwhile, I expect the Stagecoach share price to move broadly in step with the National Express share price. So, for example, if the National Express share price moves up, I expect the same will happen for Stagecoach. That is because each share will basically be valued by the market based on its possible future worth as just over a third of a National Express share.

My next move

I wouldn’t add more shares to my portfolio simply in expectation of rival bids. That’s speculation, not investment.

But I don’t plan to sell my Stagecoach shares just yet. I see it as a well-run company, so will be happy to hold the shares for now.

Christopher Ruane owns shares in Stagecoach. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

These UK shares could be well-positioned to benefit from any strong rise in the stock market in December. This phenomenon, known as the Santa Rally, happens more often than not. Of course, nobody knows if we’ll get one this year. Here are two stocks with long-term potential that I may be buying soon – could they benefit?

UK shares primed for a Santa Rally?

The first UK share that I think could do well this year and in subsequent years is MacFarlane (LSE: MACF). This month, in particular, should see high demand for packaging, benefitting the Scotland-based packaging manufacturer and distributor.

The group has historically had consistent revenue growth, alongside a return on capital employed of 15%. Combined, this indicates to me that management has run the group well, which is why it may be a good addition to my portfolio. It’s a steady and dependable kind of company. On the downside, it’s hard to really differentiate it from the competition but management has managed to grow, which is a credit to their ability.

MacFarlane is almost certainly going to be hit by the lorry driver shortage. If it can pass on these costs then it’s not a problem. If it can’t, margins will be hit. So far, the impact seems to have been contained because in November the group’s management said they expect annual profit to exceed previous expectations.

Nonetheless, MacFarlane as a packaging manufacturer could be hit financially by any raw material price increases, which may be the result of the current, well-documented supply chain issues.

I’ve been a fan of MacFarlane for a while. It seems to have the hallmarks of a quality company that is well managed and able to grow. It also pays a dividend, which is very welcome. I’m still likely to buy the shares if there’s room in my portfolio, but there are a lot of shares that I like. 

The share with phenomenal margins

Mining is an inherently tricky industry. However, I like the look of iron ore miner Ferrexpo (LSE: FXPO) and already hold the shares. The share price has declined as the commodity price of iron ore on international markets has fallen. This is partly due to fears around the Chinese economy and the health of its property market after Evergrande missed debt repayments. That is an issue that is ongoing.

So there are risks to investing in Ferrexpo, without a doubt. I’ve invested despite being aware of that. Those risks include that it operates in Ukraine and that the market dictates the price of iron ore.

On the flip side, Ferrexpo is a solid miner. It has operating margins of around 55% and huge amounts of cash on the balance sheet, giving it financial stability, as well as enabling management to pay a dividend. The dividend yield is now above 10%. Combine that with a P/E ratio of around four and I think Ferrexpo is a UK share that provides a rock bottom valuation, a high income, and the potential for short-term share price recovery.

With all that in mind, I’m likely to be adding to my holding in the miner both for yield and because the shares have become much cheaper and could bounce back. 

Andy Ross owns shares in Ferrexpo. The Motley Fool UK has recommended Macfarlane Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

One big investment dilemma has plagued me constantly this year. Should I ride the crypto wave or focus on what I think is the more stable and reliable stock market for my investments? My crypto journey has been as volatile and action-packed as a Marvel film. But I prefer DC comics’ more toned-down, extended-release vibe when it comes to my investment portfolio. Wouldn’t it be great if UK shares offered the returns of crypto while retaining their relative sense of calm?

Well, one UK share has managed to outperform Bitcoin this year. And the company has strong financials to back up its incredible 187% market returns in the last 12 months. Here are reasons why I’m watching this FTSE 250 share closely.

Time for luxury

A £1,000 investment in Watches of Switzerland Group (LSE: WOSG) shares in January 2021 would be worth £2,870 today. And although I regret missing out, I still think the business has growth potential heading into 2022. The luxury watch retailer’s great run in the market is backed up by a unique market condition and robust financials.

Over the last decade, I’ve noticed a switch in consumer mentality. Barring the extended Covid lockdown period, luxury goods have been in demand. The term ‘aspirational consumer’ encapsulates the way people look at luxury goods as status symbols. Research shows that this has been strengthened with the rise of social media, which has exposed a luxury lifestyle to more of us.

Luxury brands are now being marketed in emerging economies with a lot of success. The surge in popularity of premium goods in China and the Middle East has brought in a wider consumer base, which brands are capitalising on. This offers brands like Watches of Switzerland a new avenue for expansion.  And some analysts expect the segment to double its market share by 2030. However, WOSG is currently focused on markets in the UK and the US, where it has been very successful recently. Sales in the UK grew 43% to £418.6m in the first-half of this year. 

But is this enough to justify this UK share outstripping Bitcoin’s 147% growth in 2021?

Strong financials

The company recently released a half-yearly (H1) update for the 26 weeks to 31 October and it was a positive one for investors. Group revenue went up 44.6% to £586.2m compared to the same period last year. This resulted in statutory operating profit growth of 58.6% to £72.3m.

The luxury watches and jewellery retailer’s expansion plans in the US are gathering steam too. It recently purchased five stores in four states, which is expected to bring in around $100m in revenue. The company is focusing on luxury, monobrand boutiques in targeted shopping districts. The success in America has buoyed revenue targets this year to £1.15bn-£1.2bn (previous guidance was £1.05bn-£1.1bn).

But the stock does come with some concerns. According to a Bain luxury market report, watches were the worst hit luxury accessory category last year. That’s concerning to me as a potential investor in this UK share. And given growth this year, WOSG shares are currently trading at a forward profit-to-earnings ratio of 67 times, making it very overvalued at the moment.

But the sector looks healthy overall. This UK share is pricey at the moment. But I’m watching it closely to capitalise on any dips in price as I think it offers growth potential over the long term. 

Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It’s been quite the year for AMC Entertainment (NYSE:AMC). Exactly a year ago, the share price was trading around $3, having seen diminishing returns over several years as the movie theater operator struggled. This all changed in January, when retail traders and online chat rooms banded together to propel the AMC share price higher. After a volatile year with a high of over $62, the bubble appears to be bursting. So is this the end for the meme stock?

Reasons for the slump

Yesterday, the AMC share price dropped 15%, to close the day at $23.24. As mentioned above, this still represents an eight times return from a year ago. However, the stock has halved in value in the past month. I see a few reasons for this.

Firstly, profit taking. The rise of the share price this year has been from retail and institutional investors. For the latter, December is a period where trades usually get closed to tidy up the year. Particularly for hedge funds, for accounting processes, a lot of stocks will be sold (even if they get bought again in January). For retail traders, it might not be for accounting purposes, but to help fund Christmas presents or other needs!

Secondly, souring sentiment. This has come from a couple of different places. Partly it has come from insiders such as the CEO and CFO selling off large chunks of shares. Last week, CEO Adam Aron sold $9.65m worth of AMC stock. This had been clearly stated before it happened, but it’s still a negative for the AMC share price. 

Souring sentiment has also come from the rise of the Omicron variant. It’s still too early to know if restrictions will need to be put back on certain sectors. However, cinemas are a likely target to have restricted capacity in order to help stem the spread of the virus. In the event, this would hamper revenue for AMC in 2022.

Is the party over for the AMC share price?

Personally, I do think that the party is over for AMC. I think most investors deep down knew that the meteoric rise of the share price earlier this year was driven by speculation rather than fundamental reasons. Whatever the reason was, it didn’t stop some investors making high profits in a short space of time!

I think that some are realizing that speculative investors are moving on to new opportunities. I’d imagine some are looking to metaverse stocks instead.

Does the AMC share price really have good value, even at $23? Given the financial results recently, along with concern over operating under Omicron, I doubt it. Therefore, I won’t be looking to buy shares in AMC anytime soon. Rather, I’ll look to try and find the next key theme for 2022, that I think could be regarding the metaverse.

Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.