PayPal (PYPL) is the largest digital platform that provides money transfer services. The fast-growing company remains one of the top stocks in today’s stock market. But is PayPal stock a buy in the current stock market rally?
PayPal Stock Fundamental Analysis: A Strong Track Record
PayPal boasts a consistent track record of earnings and sales growth, stretching back to at least 2010. In that year, it earned a mere 29 cents per share. In 2019, the company reported EPS of $2.96 per share. For 2020, analysts expect the firm’s earnings to grow 28% to $3.79 a share and another 19% to $4.52 in 2021.
The evolution of digital payments is impacting the world and is a secular growth trend.
As a result of the company’s fundamental strength, PayPal’s EPS Rating is a highest-possible 99. The EPS Rating measures a company’s ability to grow profits year over year, using the most recent two quarters and the past three to five years of earnings growth.
The SMR Rating, meanwhile, highlights a company’s sales, profit margins and return on equity. Such metrics offer significant insight into a company’s fundamental strength. Driven by PayPal’s double-digit sales growth in recent quarters, 26% annual pretax margin and 23% annual ROE in 2019, the SMR Rating is an A.
According to the IBD Stock Checkup, PayPal stock boasts a perfect 99 IBD Composite Rating. The Composite Rating helps investors easily measure a stock’s fundamental and technical metrics.
PayPal Stock News And Fundamentals
In November 2019, PayPal paid over $4 billion for Honey, a company that helps users find discounts for online purchases.
In December 2019, PayPal and Citigroup (C) broadened their partnership to enable the bank’s institutional clients to make payments into users’ PayPal wallets. The new arrangement offers PayPal and Citigroup the ability to give greater payment choice, flexibility and speed in making global payments.
In the latest quarter — reported on Nov. 2— PayPal reported third-quarter earnings that topped consensus estimates while revenue edged by Wall Street targets as e-commerce continued to boom amid the Covid-19 pandemic. PayPal earnings rose 41% to an adjusted $1.07 per share, the company said. PayPal revenue climbed 25% to $5.46 billion, including the acquisition of Honey.
In addition to e-commerce growth, the Venmo person-to-person payment service also contributed to higher-than-expected TPV for PayPal. PayPal recently rolled out a Venmo credit card.
The PayPal earnings report said it added 15.2 million net new active accounts. It had 361 million active accounts as of Sept 30.
PayPal continues to battle with Square (SQ) in the cryptocurrency space. The two payment companies are marketing apps that let shoppers get discounts, make installments and buy cryptocurrencies.
PayPal’s Venmo and the Square Cash App started off as person-to-person money-transfer services for family members and friends. Now they’ve evolved into broad consumer financial services apps fueling growth for these leaders in the burgeoning field of digital payments.
Is PayPal Stock A Buy Right Now?
In the recent stock market rally, PayPal is extended past a 215.93 buy point in a cup base, according to IBD MarketSmith chart analysis. With the stock extended, it is not a buy at this time.
PayPal is a long-time IBD Leaderboard member. According to Leaderboard commentary, “The new cup base has its merits. They include a solid reversal in the week that PayPal bottomed (the week ended Nov. 6), as well as no fewer than eight up days in above-average turnover. The base is second stage, and distribution and accumulation were balanced. The relative strength line is now making new highs.”
Shares are about 6% off their 52-week high, as PayPal stock fell 2.2% Tuesday.
Competitors Include These FANG Stocks
Competitors include Amazon.com (AMZN)’s Amazon Payments, Alphabet (GOOGL)’s Google Pay and Apple (AAPL)’s Apple Pay, among others.
FANG stock Amazon is forming a new base, sporting a 3,552.35 buy point.
Fellow FANG stock and Google parent Alphabet is in the 5% buy zone above a 1726.20 buy point in a cup base.
Apple stock is forming a new base with a 138.08 buy point. Shares are about 1% away from the new entry.
In conclusion, PayPal stock is extended past a recent buy point, so the stock isn’t a buy at this time.
For more leading stocks and stocks approaching buy points, check out these IBD Stock Lists, like the Stocks Near Buy Zones. To see the current stock market trend, check out IBD’s signature daily analysis, The Big Picture.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
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