While Google (GOOG, GOOGL) and Apple (AAPL) have both made big-time post-earnings headlines in the past week or so, the buzz around PayPal (PYPL) stock has been nothing to sneeze at. As you’ve likely heard, the company has officially been spun off from its previous parent eBay … and has already outgrown its pops.
This isn’t surprising considering PayPal has made a series of acquisitions and considering the fact that it’s the incumbent leader in a hot, growing market: mobile payments. One recent survey showed use of mobile payment applications exploded from 8% in 2013 to 40% in 2014 … and there’s plenty of reason to believe that trend will continue.
With that rising tide in mind, let’s zoom in a bit on PayPal stock from an investment perspective. Here are three things everyone should know about PYPL before deciding whether to pull the trigger on shares.
- So far, so good. The sample size is admittedly small but PayPal stock started off strong to say the least. PayPal debuted on Monday with a market cap of $46.6 billion and at one point swelled to be worth over $50 billion, thanks in part to its 5% first-day jump. Since then, things have cooled off slightly, as seen in the chart below. At the time this article was published, PYPL stock was trading for just under $38 — good for a 3% climb since its July 7 close — and the company tallied a market cap of around $46 billion.
- Analysts love PYPL. The analyst community expects that trend to continue too. The $45 median analyst price target represents an additional 15%+ upside from current prices. And just look at all the bullish words being attached to the stock by everyone from Raymond James to Robert Baird (courtesy of Yahoo Finance):
This baseline of bullishness will serve as an interesting indicator going forward. Potential PayPal stock investors should definitely tune in to any updates.
- Earnings estimates. While PayPal stock is a bit frothy at 27 times forward earnings, there is some good growth on tap to justify that premium — namely, 18% long-term annualized EPS expansion. But this fact, combined with our first two points, sheds light on an important reality for PayPal stock: expectations are high.
Between the mobile payments mega-trend, the high-profile spin-off, a head-turning debut and an applauding analyst community, PYPL will have lots of eyes attentively watching when it first reports earnings. And as we saw play out with Apple, the slightest whiff could send shares sinking fast in the face of such high expectations.
But all in all, the bottom line for PayPal stock is that so far, things are pretty good — and the general consensus is that good times today will turn into more good times tomorrow. While potential investors of PYPL should keep an eye on sentiment and earnings expectations, there’s good reason to believe the pick has more upside even after sprinting out of the gate.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network, and other media.