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PayPal (PYPL) Gains 9.9% in a Month: Should You Buy the Stock?
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PayPal (PYPL - Free Report) has seen its stock rise 9.9% in the past month. This rally exceeds the industry’s growth of 4.3%, and compares favorably with the Zacks Computer & Technology sector and the S&P 500 index’s loss of 7.6% and 4.2%, respectively.
The company is riding on its solid momentum in the domestic and international markets on the back of its robust digital payment solutions, customer strategies and better pricing discipline.
PYPL generated $4.55 billion of revenues from the United States region in second-quarter 2024, which rose 8% year over year. Its international revenues were $3.33 billion, which grew 8% year over year.
One-Month Price Performance
Image Source: Zacks Investment Research
Given such an impressive return over a month, the question arises of how PayPal is poised to sustain its growth in the future and what investors should do now.
PayPal’s brand and technology pioneer, and secured and seamless peer-to-peer (P2P) transaction facility differentiate it from its competitors like Block (SQ - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) .
Its comprehensive payment ecosystem, which connects merchants and customers seamlessly, is expected to continue bolstering its competitive position in the days ahead.
Portfolio Strength Drives Growth
PayPal’s digital payment solutions and technology platform enable merchants and consumers to manage and move their money anywhere in the world, which is driving its customer momentum. Its leading brand and guest checkout solutions are key growth drivers.
Solid momentum across PYPL’s branded checkout, Braintree and Venmo are contributing significantly to transaction margin growth of the company. It is witnessing strong monthly active account growth due to the increasing adoption of PayPal and Venmo.
Branded checkout delivered 6% growth in total payments volume (TPV), whereas Venmo TPV grew 5% in second-quarter 2024.
The growing momentum of the PayPal Complete Payments platform (PPCP) is another positive. The company is gaining strong momentum across small and medium-sized businesses with PPCP. The expansion in the platform’s geographic reach to more than 34 countries remains a major positive.
Strength in Braintree remains a major positive. The company is witnessing rising unbranded transactions processed through Braintree, which is noteworthy.
By delivering enhanced checkout experiences, PayPal has strengthened its position in the massive $6-trillion e-commerce industry, in which the digitization of payments and commerce is currently at its peak.
The recent launch of Fastlane, which enables quick and secured checkout, is a plus. Fastlane is based on PayPal's decades of payment expertise to innovate and accelerate the guest checkout experience.
In its testing phase, the company witnessed encouraging results in the guest checkout conversion. Data from early adopters shows that returning Fastlane users convert at nearly 80% versus the industry average of around 50%. This increases the chance of PayPal to capture the roughly 60% share of e-commerce purchases made without a branded mark.
The company is likely to gain strong momentum among large enterprises on the back of Fastlane.
PYPL 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.
On the customer front, the solid adoption of the PayPal debit card is continuously boosting transaction activities on the company’s platform and driving growth in the average revenue per account.
The company’s reward program, which enables shoppers to get the most out of their money while increasing conversion for merchants, remains noteworthy.
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 be launched in the coming months, will drive the company’s customer momentum.
PYPL’s Tap to Pay on Android and iPhone is also gaining momentum among customers.
The company’s strong positioning in the cryptocurrency space is another positive. It helps merchants to accept crypto payments. It 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 allows customers to convert their cryptocurrency holdings seamlessly into fiat currency at the time of checkout.
Upward Estimate Revision
PayPal’s commitment to democratize financial services in order to improve the financial health of customers, and boost economic opportunities for entrepreneurs and businesses of all sizes around the world is expected to aid its near and long-term prospects.
For third-quarter 2024, PYPL expects year-over-year mid-single-digit growth in revenues. The Zacks Consensus Estimate for the same is pegged at $7.85 billion, indicating year-over-year growth of 5.8%.
The company expects non-GAAP earnings per share to exhibit high-single-digit growth on a year-over-year basis. The consensus mark for the same is pegged at $1.06, which has been revised upward by 3.9% over the past 30 days.
For 2024, PayPal anticipates non-GAAP earnings per share to see growth of low to mid-teens from that reported in 2023. The Zacks Consensus Estimate for the same stands at $4.42, which has moved north by 4.7% in the past 30 days.
The consensus mark for 2024 revenues is pegged at $31.95 billion, indicating year-over-year growth of 7.3%.
Image Source: Zacks Investment Research
Conclusion
PayPal’s strong positioning in the digital payments industry, growing momentum in the e-commerce market, compelling product portfolio, strong competitive position and upward estimate revisions present a strong investment opportunity.
Moreover, PYPL is trading at a discount with a forward 12-month P/S of 2.02X compared with the industry’s 2.51X. This indicates a good entry point for investors at present.
Image Source: Zacks Investment Research
Cheap valuation, along with fundamental strength, makes a compelling case for buying the PYPL stock at its current levels.
Image: Bigstock
PayPal (PYPL) Gains 9.9% in a Month: Should You Buy the Stock?
PayPal (PYPL - Free Report) has seen its stock rise 9.9% in the past month. This rally exceeds the industry’s growth of 4.3%, and compares favorably with the Zacks Computer & Technology sector and the S&P 500 index’s loss of 7.6% and 4.2%, respectively.
The company is riding on its solid momentum in the domestic and international markets on the back of its robust digital payment solutions, customer strategies and better pricing discipline.
PYPL generated $4.55 billion of revenues from the United States region in second-quarter 2024, which rose 8% year over year. Its international revenues were $3.33 billion, which grew 8% year over year.
One-Month Price Performance
Image Source: Zacks Investment Research
Given such an impressive return over a month, the question arises of how PayPal is poised to sustain its growth in the future and what investors should do now.
PayPal’s brand and technology pioneer, and secured and seamless peer-to-peer (P2P) transaction facility differentiate it from its competitors like Block (SQ - Free Report) , Alphabet (GOOGL - Free Report) and Apple (AAPL - Free Report) .
Its comprehensive payment ecosystem, which connects merchants and customers seamlessly, is expected to continue bolstering its competitive position in the days ahead.
Portfolio Strength Drives Growth
PayPal’s digital payment solutions and technology platform enable merchants and consumers to manage and move their money anywhere in the world, which is driving its customer momentum. Its leading brand and guest checkout solutions are key growth drivers.
Solid momentum across PYPL’s branded checkout, Braintree and Venmo are contributing significantly to transaction margin growth of the company. It is witnessing strong monthly active account growth due to the increasing adoption of PayPal and Venmo.
Branded checkout delivered 6% growth in total payments volume (TPV), whereas Venmo TPV grew 5% in second-quarter 2024.
The growing momentum of the PayPal Complete Payments platform (PPCP) is another positive. The company is gaining strong momentum across small and medium-sized businesses with PPCP. The expansion in the platform’s geographic reach to more than 34 countries remains a major positive.
Strength in Braintree remains a major positive. The company is witnessing rising unbranded transactions processed through Braintree, which is noteworthy.
By delivering enhanced checkout experiences, PayPal has strengthened its position in the massive $6-trillion e-commerce industry, in which the digitization of payments and commerce is currently at its peak.
The recent launch of Fastlane, which enables quick and secured checkout, is a plus. Fastlane is based on PayPal's decades of payment expertise to innovate and accelerate the guest checkout experience.
In its testing phase, the company witnessed encouraging results in the guest checkout conversion. Data from early adopters shows that returning Fastlane users convert at nearly 80% versus the industry average of around 50%. This increases the chance of PayPal to capture the roughly 60% share of e-commerce purchases made without a branded mark.
The company is likely to gain strong momentum among large enterprises on the back of Fastlane.
PYPL 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.
On the customer front, the solid adoption of the PayPal debit card is continuously boosting transaction activities on the company’s platform and driving growth in the average revenue per account.
The company’s reward program, which enables shoppers to get the most out of their money while increasing conversion for merchants, remains noteworthy.
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 be launched in the coming months, will drive the company’s customer momentum.
PYPL’s Tap to Pay on Android and iPhone is also gaining momentum among customers.
The company’s strong positioning in the cryptocurrency space is another positive. It helps merchants to accept crypto payments. It 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 allows customers to convert their cryptocurrency holdings seamlessly into fiat currency at the time of checkout.
Upward Estimate Revision
PayPal’s commitment to democratize financial services in order to improve the financial health of customers, and boost economic opportunities for entrepreneurs and businesses of all sizes around the world is expected to aid its near and long-term prospects.
For third-quarter 2024, PYPL expects year-over-year mid-single-digit growth in revenues. The Zacks Consensus Estimate for the same is pegged at $7.85 billion, indicating year-over-year growth of 5.8%.
The company expects non-GAAP earnings per share to exhibit high-single-digit growth on a year-over-year basis. The consensus mark for the same is pegged at $1.06, which has been revised upward by 3.9% over the past 30 days.
For 2024, PayPal anticipates non-GAAP earnings per share to see growth of low to mid-teens from that reported in 2023. The Zacks Consensus Estimate for the same stands at $4.42, which has moved north by 4.7% in the past 30 days.
The consensus mark for 2024 revenues is pegged at $31.95 billion, indicating year-over-year growth of 7.3%.
Image Source: Zacks Investment Research
Conclusion
PayPal’s strong positioning in the digital payments industry, growing momentum in the e-commerce market, compelling product portfolio, strong competitive position and upward estimate revisions present a strong investment opportunity.
Moreover, PYPL is trading at a discount with a forward 12-month P/S of 2.02X compared with the industry’s 2.51X. This indicates a good entry point for investors at present.
Image Source: Zacks Investment Research
Cheap valuation, along with fundamental strength, makes a compelling case for buying the PYPL stock at its current levels.
Currently, PayPal sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.