Given the sharp decline we are seeing today in shares of PayPal, following last night’s disappointing earnings results, we want to circle back and provide members with our thoughts on the company and how to approach the stock.

As we noted in last night’s earnings analysis, PayPal is in the penalty box. The quarter was disappointing, commentary surrounding the slowdown in back-to-school and travel dynamics was unclear, and worst of all, management misguided on the prior conference call when discussing the timing and revenue dynamics of the eBay unwind, which it now appears will negatively impact first quarter 2022 growth rates more than previously expected.

When management slips up on guidance and is forced to lower forecasts just a few months later, it means that they don’t have the visibility they thought they did and that we must sideline ourselves until we have more information. We simply cannot rely on the new forecast as much as we may have otherwise.

While the team was upbeat on the longer-term dynamics, in large part because the operating agreement they had with eBay has now expired and freed them to partner with new ecommerce players — such as Amazon — that confidence is doing for little to support the stock as PayPal is now a “show me” story, with investors demanding execution and tangible results.

So, what can management do other than wait until the next release to demonstrate their ability to meet or exceed investor expectations? The most immediate move we think they can and should make, is to announce a buyback.

On the call, the team commented that since launching the new PayPal app, “initial results show that the new app has driven a 25 times lift in consumers exploring our deals and offers tab, a 15% increase in first-time users transacting with crypto, and it has also driven a 35% lift in our Cash Card enrollments, and the average revenue per account from digital wallet users is twice that of checkout-only users.” If that is the case then there is reason to believe that we are approaching a trough in growth rates — once eBay is actually put behind us. Indeed the team did comment that the first quarter of 2022 is expected to be the lowest growth quarter of the year.

Opportunity in the stock market is usually an ugly thing, nobody wants to buy the most recent loser and with shares now down ~33% from recent all-time highs, there is no debating that the stock has been a loser. However, the stocks of great companies that get beaten up on temporary dynamics or the occasional misstep by an otherwise strong management tend to be major longer-term opportunities for patient investors.

This is management’s opportunity to broadcast that this recent negative update is just that, the result of a temporary headwind and rare misstep. If the team is truly confident in their updated view of when the eBay headwind will be behind us and how bright the future will be once it is, then they as a long-term growth focused team should be looking at this decline as a major opportunity.

With the Pinterest acquisition officially off the table, the Paidy acquisition complete, Venmo profitability potentially set to inflect in 2022 on the back of the Amazon integration, $20 billion of liquidity sitting on what management views as an “incredibly strong balance sheet,” and the business generating over $5 billion per year in free cash flow, management has an opportunity to put their money where their mouth is and demonstrate to investors that of all the things out there that they could spend the balance sheet on, none are more attractive than shares of PYPL at these levels.

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(Jim Cramer's Charitable Trust is long PYPL, AMZN)