Despite Big Gains, PayPal Stock Still Has More to Offer

It’s probably no surprise that PayPal (NASDAQ:PYPL) is one of my favorite companies these days. PayPal stock was already doing well, taking full advantage of its pioneering move toward mobile payments. But with the pandemic, few were in the right place at the right time the way that this company was.

PayPal (PYPL) logo overlays daylight photo of corporate building
Source: JHVEPhoto / Shutterstock.com

The stock has posted a gain of over 80% so far in 2020. That growth is likely to continue. In fact, KeyBanc Capital Markets just assigned an “overweight” rating to PYPL, and upped its price target.

With PayPal stock currently trading in the $203 range, that new price target suggests confidence that there is still upside. KeyBanc is far from the most optimistic about PYPL’s prospects. Even the most jaded analysts don’t see PayPal dropping too far, which makes an investment in the stock about as low-risk as you can get.

PayPal Stock Gets an Upgrade

Three days ago, it was reported that KeyBanc Capital Markets had assigned an “overweight” rating to PayPal stock. In addition, KeyBanc boosted its price target from $215 to $230. At current prices, that represents around 13% upside.

And KeyBanc is actually far from the most bullish on its PYPL take. For example, at the end of August, Mizuho Financial Group initiated coverage of PayPal with a “buy” rating and a $285 price target. That’s probably the most extreme take at this point. If you check the 44 analysts being tracked by The Wall Street Journal, $285 is currently the highest price target. 

In fact, it’s tough to find any naysayers, with 34 of the 44 analysts rating PYPL as a buy and three giving it overweight status. Their average 12-month price target of $222.13 is only a little under KeyBanc’s new target. Even the most pessimistic of analysts has a $200 price target. So, even in a worst-case scenario — one that few are projecting — your loss when buying PayPal stock at its current value would be negligible.

Naturally, PYPL earns an “A” rating in Portfolio Grader.

Behind the Big Performance

PayPal was a pioneer in online payments, expanding into mobile with its Venmo digital wallet app. The company has taken advantage of its early-arrival status to build a sizeable lead in online payment processing. Of course, the market for online and mobile payments was already growing, but the pandemic poured gasoline on the fire.

Online shopping took off in popularity. In addition, fear that the coronavirus might lurk on cash boosted the adoption of mobile payment methods like Venmo.

It’s easy to see how the pandemic has impacted PayPal stock. In the second quarter, the company easily beat Wall street estimates. Revenue of $5.26 billion for the quarter was up 22%, and Adjusted earnings-per share of $1.07 blew past estimates of 88 cents.

With performance like that, it’s little wonder PayPal stock has posted such significant gains.

Bottom Line

There is a lot to like about this stock. Yes, the novel coronavirus boosted the use of PayPal and Venmo, but I’m not particularly concerned about that usage dropping off post-pandemic. With so many new users added, chances are that a good chunk of them will stick with PayPal once they’ve used it. Especially now that the pandemic has created paranoia around cash.

And PayPal stock had already put on a decent showing prior to Covid-19. Between 2017 and the start of 2020, shares increased in value by 175% — that’s solid performance. The pandemic’s boost has made it more expensive, for sure, but PYPL still deserves a spot in your portfolio. It promises continued long-term growth. 

On the date of publication, Louis Navellier had a long position in PYPL. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system —with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.


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