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, the firm’s earnings grew 31% to $3.88 a share. Analysts expect the company’s EPS to grow 18% in 2021 and another 26% in 2022.
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 96 out of a perfect 99 IBD Composite Rating. The Composite Rating helps investors easily measure a stock’s fundamental and technical metrics.
PayPal Stock News: Bitcoin Trading
In the last quarter — reported on Feb. 3— PayPal reported fourth-quarter earnings and revenue that topped Wall Street estimates as e-commerce continued to boom amid the Covid-19 pandemic.
PayPal earnings climbed 29% to $1.08 an adjusted share, the company said. PayPal revenue rose 23% to $6.12 billion, including the acquisition of Honey Science.
The company said it added 16 million net new active accounts worldwide in the December quarter. Well known for its online checkout button, PayPal had 377 million active accounts as of Dec. 31. PayPal did not update how many users there are of the Venmo person-to-person payment service. Venmo had 65 million users 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.
In late November, PayPal launched a cryptocurrency trading service, allowing clients to buy and sell Bitcoin.
In addition, PayPal customers will also be able to use cryptocurrencies to shop at the 28 million merchants on its network starting in early 2021, the company said.
Is PYPL 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 breaking down through its 50-day support level, the stock is no longer a potential buy.
PayPal is a long-time IBD Leaderboard member. According to Leaderboard commentary, “PayPal has reached its profit targets, and with shares below the 50-day line it’s smart to lighten the position or sell it all. Also, market risk is higher.”
PayPal stock fell 1.5% Monday.
Bitcoin hit its high-water mark on March 13, topping out at $61,556. The price of Bitcoin rose about 3% Thursday to trade around $57,400, according to CoinDesk.
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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