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This article first appeared on Simply Wall St News .
After declining almost 40% from the all-time high in 2021, PayPal Holdings, Inc. ( NASDAQ: PYPL ) stock is still looking for a sure footing.
Despite increasing institutional optimism, it remains below US$200, and a popular technical measure – a 50-day moving average.
Check out our latest analysis for PayPal Holdings
Optimism After a Sell-Off
Paypal's performance in 2021 was the worst one in a long time. While we can blame the US$45b acquisition of Pinterest fizzling out in October, the disappointing guidance following the Q3 earnings, and finally, the broad market sell-off in November didn't help the case.
While the chart is still failing to show the recovery, the number of institutions willing to take an optimistic stance is increasing. Evercore ISI has named Paypal the top pick in the payment space for 2022, while BMO Capital upgraded the stock to Outperform. BMO analyst James Fotheringham noted tax-loss selling is done and now sees strong organic revenue growth potential. However, his new price target has been reduced from US$278 to US$224.
Meanwhile, PayPal's senior VP of crypto and digital currencies, Jose Fernandez da Ponte stated that the company is exploring the creation of a stablecoin. The announcement came after a developer discovered evidence within the app, referring to "PayPal Coin," which would be backed by the U.S. dollar.
Examining PayPal's Balance Sheet
As you can see below, PayPal Holdings had US$8.95b of debt, which is about the same as the year before. You can click the chart for greater detail.
However, its balance sheet shows it holds US$13.3b in cash, so it has US$4.35b net cash.
How Strong Is PayPal Holdings' Balance Sheet?
According to the last reported balance sheet, PayPal Holdings had liabilities of US$41.7b due within 12 months and liabilities of US$10.7b due beyond 12 months.Offsetting these obligations, it had cash of US$13.3b as well as receivables valued at US$4.48b due within 12 months.So it has liabilities totaling US$34.7b more than its cash and near-term receivables combined.
Of course, PayPal Holdings has a market capitalization of US$220.4b, so these liabilities are manageable.But there are sufficient liabilities that we would undoubtedly recommend shareholders continue to monitor the balance sheet in the future.Despite its noteworthy liabilities, PayPal Holdings boasts net cash, so it's fair to say it does not have a heavy debt load.
In addition to that, we're happy to report that PayPal Holdings has boosted its EBIT by 33%, thus reducing the specter of future debt repayments.The balance sheet is the area to focus on when analyzing debt.But it is future earnings, more than anything, that will determine PayPal Holdings' ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.