Reports fourth quarter 2020 results on Wednesday, February 3 after the close
Revenue Expectation: $ 6.08 Billion
EPS Forecast: $ 0,995
Investors today have many reasons to rave about the payment processing giant PayPal Holdings (NASDAQ :). Stock has boomed since the outbreak of a pandemic in March, when millions of stuck customers relied on the company's technology to fulfill online orders.
PayPal told investors in November that it could rise 22%, excluding the impact of currency movements, as active accounts have grown to more than 70 million in fiscal 2020. According to Chief Executive Officer Dan Schulman, PayPal continues to take advantage of home shoppers as a result of locked orders, noting that consumers over 50 sign up to PayPal faster than any other target audience.
Schulman said:
"Obviously, as people spend more time at home as the virus increases, it will lead to more online shopping."
The rise in PayPal's stock clearly reflects that growth momentum. Shares are up 112% in the past 12 months, closing at $ 249.10 on Tuesday.
Strategic Moves
The pandemic-induced rise is undoubtedly the most significant contributor to PayPal's strong performance, but it would be unfair not to give the San Jose, California-based company management credit for positioning the PYPL to take advantage of this opportunity.
PayPal has pursued a smart growth strategy for the past five years, combined with some valuable acquisitions and strategic moves. To counter growing competition in the very crowded digital payments space – where disruptors attack from all fronts – PayPal decided to forge and forge valuable alliances with the largest credit card issuers, Visa (NYSE 🙂 and Mastercard (NYSE :).
This strategic move in 2016 allowed consumers to seamlessly link their PayPal accounts to their credit and debit cards, while giving credit card issuers access to contactless payment technology.
During this time, PayPal also acquired a variety of businesses that allowed it to keep up with rapidly changing financial technology.
Following the highly successful 2014 acquisition of Venmo, which has become popular with tech-savvy young consumers, PayPal acquired the Swedish small business platform iZettle in 2018 as part of its drive to expand globally and its presence in brick- and-mortar stores. Hyperwallet, which allows businesses to send payments almost anywhere in the world, was another major acquisition in the same year.
Perhaps the greatest success that enabled PayPal's future growth came from the online checkout button appearing on supplier websites. It's a great convenience for buyers, avoiding the hassle of entering card details and other payment information for each transaction.
The result of all of these initiatives: Spending on the company's platform increased 36% to $ 247 billion in the third quarter. That includes $ 44 billion in payments made on PayPal & # 39; s personal platform Venmo, which had its best quarter ever in the three months ending September 30.
What's in store for PayPal Shares?
Going forward, the main question that comes to mind is: Will PayPal continue to produce the kind of growth in 2021 that pushed its stocks to a record high of $ 252 a few weeks ago?
After more than doubling in 12 months, while PayPal stock has gained more than 500% in the past five years, PayPal's stock is trading near analysts' 12-month consensus price target of $ 256.07 .
Headwinds, some analysts point out that there is weakness in the company's travel and events industry, a slowdown in lending that could continue throughout the year, and that the company's former cousin eBay (NASDAQ 🙂 moves from PayPal to its own managed payment platform.
However, this does not mean that this stock cannot provide further value to long-term investors. The online payments industry has a strong advantage at a time when e-commerce is gaining popularity and gaining market share like never before.
In a recent note, MoffettNathanson analyst Lisa Ellis wrote:
“PayPal is rapidly rolling out important new wallet features: installment lending, crypto investments, and bill payment, just to name a few. And there are plenty of reasons to believe that the pandemic acceleration of e-commerce will continue. "
Bottom Line
Even after a huge sales jump last year, PayPal is still in a growth phase. Today's earnings report will likely reaffirm growth potential in 2021, making the stock a good buy-and-hold bet for long-term investors.
