With more than 360 million customers, digital payments processor PayPal (NASDAQ:PYPL) has become a key component of the e-commerce economy over the years. As a result, the price of PayPal stock has increased swiftly and steadily, with just a handful of brief pullbacks.
In order to remain dominant in a fast-moving, quickly changing e-payments market, businesses must be willing to change and adapt to consumers preferences.
This means taking chances and adopting technologies that other businesses may be hesitant to consider. An example of this would be the blockchain. Conventional financial institutions are sometimes slow and reluctant to take the digital ledger seriously.
PayPal, on the other hand, is taking cryptocurrency and the blockchain very seriously. This future-facing vision will stand PayPal stock holders in good stead, allowing them to continue earning powerful returns.
A Closer Look at PayPal Stock
“Stunning” and “historic” are two words that people might use to describe 2020’s performance for PayPal stock. Amazingly, the stock posted a 115% annual return.
Along with that, PayPal’s market capitalization is now bigger than that of some major traditional financial institutions. To be more specific, the company’s market cap currently stands at around $274 billion.
Now, some value-focused investors might express concern over PayPal’s trailing 12-month price-earnings ratio, which is 88.38. I’ll admit that this is rather lofty, but a high P/E ratio is to be expected after a powerful price run-up.
How powerful? Suffice it to say that the 52-week range of PayPal stock is $82.07 to $244.25. And, the stock ended the year at $234.20, not too far from its all-time high.
Making the Right Moves
To stay ahead of its competition, PayPal has taken specific steps to demonstrate responsiveness to the company’s clients.
For instance, PayPal has chosen to waive its cash-a-check feature’s check-cashing fees for recipients of government stimulus paper checks. Customers will be able to cash their paper stimulus checks remotely through the cash-a-check feature, a process that typically can be done in a matter of minutes.
But there’s another example that could have more far-reaching consequences in the digital payments industry. Specifically, PayPal went full-on pro-blockchain by allowing its users to buy and sell two cryptocurrencies, bitcoin and Ethereum, from their PayPal accounts.
Moreover, PayPal has made the process easy and accessible to its users as they can purchase as little as $1 worth of bitcoin through the PayPal app. With this new functionality, PayPal is quickly becoming a disruptor in the “new money” economy which isn’t just about dollars and cents.
A Synergistic Effect
On the morning of Jan. 2, the bitcoin price broke through the $31,000 level for the first time.
I’m not going to claim that PayPal’s adoption of bitcoin was entirely responsible for Bitcoin’s stunning price increase. Yet, an argument could be made that it was a contributing factor.
At the very least, I think we can agree that since PayPal is a popular e-payments platform, it’s helping to bring bitcoin and Ethereum into the mainstream.
Through PayPal, customers will be able to make purchases with cryptocurrency at more than 26 million online sites worldwide. This undoubtedly will increase the acceptance and use of bitcoin in the coming months.
At the same time, there will be a synergistic effect as bitcoin’s price increase should help to boost PayPal stock. Let’s face it: people like bitcoin when the price is going up, not when it’s falling.
Crowds tend to rally around what’s popular, and I expect that bitcoin’s increasing popularity will help PayPal, and vice versa.
The Bottom Line
Not long ago, I recommended that investors shouldn’t let the run-up in the PayPal stock price deter them from buying or holding it.
Today, I’m standing by my bullish stance. PayPal is responsive and disruptive among payment processors. And, the bitcoin connection will only cement PayPal’s status as a leader in the field.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.