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PayPal Declines 4.1% YTD: How Should You Play the Stock in 2H?
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Shares of PayPal (PYPL - Free Report) have not been performing well of late, having declined 4.1% in the year-to-date period against the S&P 500 and the Zacks Computer & Technology sector’s returns of 17.6% and 29.4%, respectively.
The PYPL stock is also currently trading below its 50-day moving average, indicating a bearish trend.
Market uncertainties, high inflation, unfavorable foreign exchange fluctuations and sluggish trends in consumer spending are hurting the near-term prospects of the company.
The normalization trend in the post-pandemic era has been significantly impacting PayPal. Declining demand for online payments than that in the pandemic remains a negative. As the online shopping trend cooled following the pandemic, tremendous growth that the company witnessed during the pandemic evaporated.
PYPL Shares Trading Below 50-Day SMA
Image Source: Zacks Investment Research
The highly competitive nature of the market in which PayPal operates is another big concern. It faces stiff competition from industry peers like Block (SQ - Free Report) , Alphabet’s (GOOGL - Free Report) Google and Apple (AAPL - Free Report) , as well as traditional fintech companies, such as MasterCard and Visa. Intensifying competition is hurting PayPal’s market position. For the past few quarters, it has been losing its active accounts, which declined 1% year over year in first-quarter 2024 and 2% year over year in fourth-quarter 2023.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
As investors turn their attention to the second half of the year, the payment giant's stock presents both opportunities and challenges that warrant careful consideration.
PayPal has been well-focused on execution, portfolio enhancement and customer strategies. Investors should pay close attention to its operational improvements across large enterprises, small businesses and consumers.
Initiatives That Will Turn the Tables in PYPL’s Favor
PayPal’s progress in the execution of customer strategies presents a solid long-term opportunity, thanks to its robust portfolio.
For large enterprise businesses, the company is upgrading its core branded checkout experiences. It is making good progress in the early testing of Fast Lane by PayPal. It has already witnessed a low-double-digit lift in guest checkout conversion for participating merchants in the testing phase. This encouraging result indicates promising demand for this product. The company is gearing up to make Fast Lane generally available in the United States in the second half of the year.
PayPal is also shifting to more password-less authentication processes like biometrics. It plans to launch a redesigned mobile checkout experience. This is expected to result in higher conversion rates.
In addition to large enterprises, the company is gaining strong momentum across small and medium-sized businesses (SMBs) with the PayPal Complete Payments platform. The expansion in the platform’s geographic reach to more than 34 countries remains a major positive. Introducing the latest features to the platform in Australia, Germany and the United States is a plus. These efforts are expected to deepen PayPal’s relationship with SMBs and reduce the churn rate.
On the consumer front, the company’s rewards program, which enables shoppers to get the most out of their money, while increasing conversion for merchants, remains noteworthy. It has also started testing a comprehensive reward-focused lifecycle marketing program.
The solid adoption of the PayPal debit card by customers is continuously boosting transaction activities on the company’s platform and driving growth in the average revenue per account.
PayPal’s collaboration with Apple and Alphabet to integrate the Venmo debit card with Apple Pay and Google Pay is a plus. This feature, which is expected to launch in the coming months, will drive the company’s customer momentum.
PayPal’s Tap to Pay on Android and iPhone is also gaining momentum among customers.
Strength in Cryptocurrency Boosts Prospects
PayPal is one of the well-known crypto stocks that should be focused on. It helps merchants to accept crypto payments. The company offers a service that allows its customers to buy, hold and sell cryptocurrency directly from their PayPal accounts.
PYPL provides a feature called Crypto on Venmo, which allows Venmo customers to buy, hold and sell cryptocurrency directly within the Venmo app. It also offers a feature called Checkout with Crypto, which lets customers convert their cryptocurrency holdings seamlessly into fiat currency at the time of checkout.
PayPal recently made PayPal USD (PYUSD) available on the Solana blockchain, making its stablecoin faster and cheaper to use, which is a noteworthy move.
Final Note
Amid the current macroeconomic headwinds, PayPal’s solid growth strategies, deepening focus on various merchant groups and customers, strong solutions portfolio and growing prospects in the cryptocurrency space are expected to benefit it in the long run.
The Zacks Consensus Estimate for 2024 revenues is pegged at $31.94 billion, indicating 7.3% year-over-year growth. The consensus mark for 2024 earnings has been unchanged at $4.14 per share over the past 30 days.
Moreover, PayPal is trading at a discount with a forward 12-month P/S of 1.85X compared with the Zacks Internet-Software industry’s 2.68X. This indicates robust opportunities for investors.
Image: Bigstock
PayPal Declines 4.1% YTD: How Should You Play the Stock in 2H?
Shares of PayPal (PYPL - Free Report) have not been performing well of late, having declined 4.1% in the year-to-date period against the S&P 500 and the Zacks Computer & Technology sector’s returns of 17.6% and 29.4%, respectively.
The PYPL stock is also currently trading below its 50-day moving average, indicating a bearish trend.
Market uncertainties, high inflation, unfavorable foreign exchange fluctuations and sluggish trends in consumer spending are hurting the near-term prospects of the company.
The normalization trend in the post-pandemic era has been significantly impacting PayPal. Declining demand for online payments than that in the pandemic remains a negative. As the online shopping trend cooled following the pandemic, tremendous growth that the company witnessed during the pandemic evaporated.
PYPL Shares Trading Below 50-Day SMA
Image Source: Zacks Investment Research
The highly competitive nature of the market in which PayPal operates is another big concern. It faces stiff competition from industry peers like Block (SQ - Free Report) , Alphabet’s (GOOGL - Free Report) Google and Apple (AAPL - Free Report) , as well as traditional fintech companies, such as MasterCard and Visa. Intensifying competition is hurting PayPal’s market position. For the past few quarters, it has been losing its active accounts, which declined 1% year over year in first-quarter 2024 and 2% year over year in fourth-quarter 2023.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
As investors turn their attention to the second half of the year, the payment giant's stock presents both opportunities and challenges that warrant careful consideration.
PayPal has been well-focused on execution, portfolio enhancement and customer strategies. Investors should pay close attention to its operational improvements across large enterprises, small businesses and consumers.
Initiatives That Will Turn the Tables in PYPL’s Favor
PayPal’s progress in the execution of customer strategies presents a solid long-term opportunity, thanks to its robust portfolio.
For large enterprise businesses, the company is upgrading its core branded checkout experiences. It is making good progress in the early testing of Fast Lane by PayPal. It has already witnessed a low-double-digit lift in guest checkout conversion for participating merchants in the testing phase. This encouraging result indicates promising demand for this product. The company is gearing up to make Fast Lane generally available in the United States in the second half of the year.
PayPal is also shifting to more password-less authentication processes like biometrics. It plans to launch a redesigned mobile checkout experience. This is expected to result in higher conversion rates.
In addition to large enterprises, the company is gaining strong momentum across small and medium-sized businesses (SMBs) with the PayPal Complete Payments platform. The expansion in the platform’s geographic reach to more than 34 countries remains a major positive. Introducing the latest features to the platform in Australia, Germany and the United States is a plus. These efforts are expected to deepen PayPal’s relationship with SMBs and reduce the churn rate.
On the consumer front, the company’s rewards program, which enables shoppers to get the most out of their money, while increasing conversion for merchants, remains noteworthy. It has also started testing a comprehensive reward-focused lifecycle marketing program.
The solid adoption of the PayPal debit card by customers is continuously boosting transaction activities on the company’s platform and driving growth in the average revenue per account.
PayPal’s collaboration with Apple and Alphabet to integrate the Venmo debit card with Apple Pay and Google Pay is a plus. This feature, which is expected to launch in the coming months, will drive the company’s customer momentum.
PayPal’s Tap to Pay on Android and iPhone is also gaining momentum among customers.
Strength in Cryptocurrency Boosts Prospects
PayPal is one of the well-known crypto stocks that should be focused on. It helps merchants to accept crypto payments. The company offers a service that allows its customers to buy, hold and sell cryptocurrency directly from their PayPal accounts.
PYPL provides a feature called Crypto on Venmo, which allows Venmo customers to buy, hold and sell cryptocurrency directly within the Venmo app. It also offers a feature called Checkout with Crypto, which lets customers convert their cryptocurrency holdings seamlessly into fiat currency at the time of checkout.
PayPal recently made PayPal USD (PYUSD) available on the Solana blockchain, making its stablecoin faster and cheaper to use, which is a noteworthy move.
Final Note
Amid the current macroeconomic headwinds, PayPal’s solid growth strategies, deepening focus on various merchant groups and customers, strong solutions portfolio and growing prospects in the cryptocurrency space are expected to benefit it in the long run.
The Zacks Consensus Estimate for 2024 revenues is pegged at $31.94 billion, indicating 7.3% year-over-year growth. The consensus mark for 2024 earnings has been unchanged at $4.14 per share over the past 30 days.
Moreover, PayPal is trading at a discount with a forward 12-month P/S of 1.85X compared with the Zacks Internet-Software industry’s 2.68X. This indicates robust opportunities for investors.
Image Source: Zacks Investment Research
PayPal currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.