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Bull of the Day: PayPal (PYPL)

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Zacks Rank #1 (Strong Buy) stock PayPal ((PYPL - Free Report) ) is a payment platform that enables individuals and businesses to send and receive money securely over the internet. PayPal functions as a middleman, connecting users’ bank accounts or credit cards with merchants or recipients to facilitate transactions without disclosing sensitive financial details. PayPal is commonly used for e-commerce purchases, sending money to loved ones, and conducting business transactions conveniently and securely.

Venmo is a Bullish Catalyst for PayPal

Venmo is a digital wallet service owned by PayPal that has gained a strong following among the younger generation in the United States. It also functions as a social platform where users can view each other’s public transactions and add commentary or emoticons.

Venmo saw an 8% increase in total payment volume (TPV) in the first quarter of 2024, year-over-year. In 2022, Venmo handled nearly $250 billion in TPV and enjoyed a 6% increase year-over-year.

Visa, Master Drive PayPal EPS Growth

PayPal management has been focused on leveraging partnerships to increase growth. Through its partnerships with credit card company juggernauts Visa ((V - Free Report) ) and Mastercard ((MA - Free Report) ), PayPal has expanded its reach and has onboarded millions of merchants and consumers worldwide.

A deal with Alphabet’s ((GOOGL - Free Report) ) Google Pay and YouTube platforms has made payments across a wide variety of platforms seamless. Finally, a strategic partnership with Chinese e-commerce giant Alibaba ((BABA - Free Report) ) has allowed the company to tap into the massive Asia market.

PayPal is a Value Play

PYPL, once a pandemic darling, has cratered from ~$300 to under $100 today. However, unlike other pandemic darlings, PayPal has a real business. PYPL earnings are now higher than when the stock was at $300 and are expected to keep climbing into 2027.

Zacks Investment Research
Image Source: Zacks Investment Research

Meanwhile, PYPL’s forward price-to-sales (P/S) ratio is near 5-year lows and sits at just 1.98x. For reference, it was 13.63x at the highs. PYPL has a cheaper valuation than its sub-industry, sector, and the S&P 500 Index.

Zacks Investment Research
Image Source: Zacks Investment Research

PYPL Breaks Out

PYPL shares broke out of a long consolidation late last month. Further, two positives appear on the charts:

1)      Golden Cross: The faster 50-day moving average has crossed above the longer-term 200-day moving average – a bullish signal.

2)      Support/Resistance Flip: Old PYPL price resistance has turned into support and the stock is holding up very well in a tough tape.

Zacks Investment Research
Image Source: TradingView

Conclusion

Venmo growth, strong partnerships, and a cheap valuation are bullish catalysts for PayPal shares over the next 6-12 months.

 

 


 

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