There’s an interesting side note from PayPal (NASDAQ:PYPL) that I think bears discussion. It’s regarding cryptocurrency and how those assets will (and won’t) affect PayPal stock.
As you may recall, PayPal issued its fourth-quarter and full-year earnings report on Feb. 3. Then on Feb. 11 the company held its virtual Investor Day event and sat down for some interviews.
It was during Investor Day when PayPal added more detail to the company’s plans to allow customers to buy and sell cryptocurrency. It was only a few months ago when PayPal first announced that its customers would be able to buy, sell and hold cryptocurrency using the PayPal app.
PayPal and Cryptocurrencies
PayPal is going all-in on opening up its platform to cryptocurrency sales, as I discussed recently. It outlined how the company aspires to be the digital wallet for cryptocurrencies.
I’m all for that.
Gone are the days where anyone who wanted to trade cryptocurrency had to keep it in a hard-to-access digital wallet that was maintained on a separate server and accessed only through a long, complicated private key.
There are plenty of stories out there from people trying to access long-lost cryptocurrency wallets that will make any investor lose sleep with the anxiety of keeping track of crypto holdings.
Today, however, cryptocurrency trades are much more accessible for everyday investors on platforms such as Robinhood and Square (NYSE:SQ). So, it makes sense for PayPal to get in on that potentially lucrative business.
Venmo, which is the digital platform owned by PayPal, is also expected to offer cryptocurrency transactions this year.
PayPal Sets Some Boundaries
But it was an interview with CNBC’s Mad Money last week that I think is also important. PayPal CFO John Rainey said that while PayPal is opening up its platform to individual investors who may want to buy and sell cryptocurrency, PayPal itself won’t be making an investment in cryptos. That is, it won’t be following the lead of Tesla (NASDAQ:TSLA), which recently announced it will invest $1.5 billion in Bitcoin (CCC:BTC-USD).
“We’re not going to invest corporate cash, probably, in sort of financial assets like that,” Rainey said. “But we want to capitalize on this growth opportunity that’s in front of us.”
CEO Dan Schulman said that instead of investing in cryptocurrency, PayPal wants to use its cash in other ways.
“We want to use that cash. We want to use our balance sheet as a strategic weapon,” Schulman told Mad Money. “That may be returning cash to shareholders and it may be through acquisition. But every one of those dollars matter to us and we really take our capital allocation quite seriously.”
As someone who holds PayPal stock, I’m good with that strategy, too. I appreciate that PayPal is looking to grow through strategic acquisitions in an extremely competitive and growing fintech space rather than subjecting itself to cryptocurrency’s volatility.
And I’m not the only one who continues to be bullish about PayPal and its current strategy.
Analyst Recommendations on PayPal Stock
PayPal is getting a flurry of upgrades from analysts. They’re obviously happy with what PayPal revealed in their Investor Day presentation, its full-year earnings report and in media interviews.
- BTIG analyst Mark Palmer raised his price target for PayPal stock from $300 to $345, citing the company’s five-year guidance.
- Keefe Bruyette analyst Sanjay Sakhrani raised his price target from $290 to $340, citing “a number of growth opportunities.”
- Loop Capital analyst Kenneth Hill raised his company’s price target from $291 to $321.
- Raymond James analyst John Davis raised his price target from $296 to $333, saying he was impressed with PayPal’s potential.
- Canaccord analyst Joseph Vafi raised his price target on PayPal stock from $306 to $315, saying he was impressed the company is able to exploit numerous fast-moving trends.
- JPMorgan analyst Tien-tsin Huang raised the company’s price target from $249 to $310, saying that PayPal stock remains one of the firm’s top stocks for 2021.
The Bottom Line
PayPal will gain business by allowing cryptocurrency transactions on its platform. But at the same time, I’m comfortable with PayPal declining to make a major investment in Bitcoin or another cryptocurrency.
There are lots of opportunities for growth in the challenging fintech space. I appreciate that PayPal is keeping its options open. It could make a purchase, it could expand an existing business, or it could return some value to shareholders.
My own analysis of PayPal stock is in line with the bullish analysis of my peers. PayPal has an “A” grade and a strong buy recommendation in my Portfolio Grader.
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.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article had long positions in TSLA and BTC. The staff member did not hold (either directly or indirectly) any other 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.