Investors in PayPal (NASDAQ:PYPL) saw their shares close at an all-time high of $304.79 on Feb. 16. That followed an impressive 111% gain for 2020. Caught up in a broad selloff in tech stocks that began just as PYPL stock peaked, shares slid. By March, PYPL was trading below its 2021 opening value. However, the stock has been in recovery mode for the past six weeks. Currently trading around the $275 level, that February all-time high is once again within reach.
PayPal is a company that benefitted tremendously from two big pandemic trends: online shopping and cashless transactions. These were a big part of the reason why 2020 was PayPal’s “strongest performance” in company history.
In addition, the company has leaned into cryptocurrency. These factors do add an element of risk to the Portfolio Grader “B” rated stock. However, with millions of new users and strong guidance for 2021, PYPL stock has real long-term growth potential. That makes the recent dip a buying opportunity — but with its recent performance, the window of opportunity is closing.
Leveraging Pandemic Growth
Many companies have suffered during the pandemic. PayPal is one that saw its business get a big boost in 2020. Major consumer trends that accelerated in 2020 included online shopping, using contactless payments and using cash transfer apps instead of physical money. PayPal is a major player in all three of these areas. PayPal was a pioneer — and remains the leader — in online payments. The company’s Venmo app is a popular choice as a digital wallet. PayPal contactless payment is currently accepted in 600,000 U.S. retail locations, including restaurants, stores and pharmacies.
The company’s full-year 2020 earnings report showed just how big an impact the pandemic had on its business. Among the highlights, net new active accounts increased 95% compared to 2019, total payment volume increased to $936 billion (up 31% year-over-year), and revenue was up 22% YoY. Adjusted EPS of $3.54 for 2020 was up 71% over 2019. Online shopping in particular may soften slightly as the country emerges from the pandemic, but it’s not expected to retreat to pre-pandemic levels.
One of the important gains from 2020 is the addition of new users. PayPal ended the year with a total of 377 million accounts, up 72.7 million. An increase of that magnitude means more people using PayPal services going forward. That helps ensure organic revenue growth, even if online shopping were to slow or cryptocurrency falls out of favor.
One of PayPal’s biggest moves in 2020 was to embrace cryptocurrencies. Last October, the company announced new services that would allow PayPal customers to buy and sell cryptocurrencies. On March 8, PayPal announced it was buying cryptocurrency security startup Curv. PYPL stock popped 7% on that news. Then, at the end of March, PayPal announced users could now use cryptocurrency in their digital wallets to pay for online purchases. PayPal says that 29 million merchants will soon be participating. That announcement kicked off the current PYPL stock rally.
Bottom Line on PYPL Stock
PayPal was on my list of “8 Stocks to Buy for March.” At the time that was published, PYPL stock was well into its slide, but if you’d acted then, your shares would be worth 8.5% more today. My position on PayPal is pretty clear. But what are other experts saying?
The Wall Street Journal is tracking 49 investment analysts who cover PayPal. They have a consensus “Buy” rating on the stock. Their average 12-month price target of $311.58 represents a healthy 13% upside.
Many of these analysts see the company’s move into cryptocurrency paying off. For example, in January, BTIG analyst Mark Palmer upgraded PYPL stock to “Buy” with a $300 price target. His reasoning was that between trading and being able make online purchases using cryptocurrency holdings, crypto could add $1 billion to PayPal’s annual revenue by 2022.
History has proven that cryptocurrency is anything but a sure thing. However, when you combine that potential with PayPal’s user growth and the expected post-pandemic stickiness of online shopping and Venmo? The prospect for continued growth is real.
With PayPal shares continuing to recover, if you’re looking to ride that wave and add PYPL stock to your portfolio, you may want to act sooner rather than later.
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.
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