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PayPal (PYPL) is the largest digital platform that provides money transfer services. The fast-growing company remains one of the high-profile stocks in today’s stock market. But is PayPal stock a buy in the current stock market rally?
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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. In 2021, the company’s EPS grew 18% to $4.60. Analysts expect the company’s EPS to grow 1% in 2022 and 25% in 2023.
As a result of the company’s fundamental strength, PayPal’s EPS Rating is an 85 out of 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, 24% annual pretax margin and 26% annual ROE in 2021, the SMR Rating is an A.
According to the IBD Stock Checkup, PayPal stock shows a weak 40 out of a perfect 99 IBD Composite Rating. The Composite Rating helps investors easily measure a stock’s fundamental and technical metrics.
PayPal reported its fourth-quarter earnings results on Feb. 1. The company reported fourth-quarter earnings that fell short of expectations while total payment volume also came in below estimates, resulting in a 24.6% plunge in PayPal shares on Feb. 2.
PayPal Stock News
PayPal continues to battle with Block (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 2020, PayPal launched a cryptocurrency trading service, allowing clients to buy and sell Bitcoin. In addition, PayPal customers are able to use cryptocurrencies to shop at the 28 million merchants on its network, which started in 2021.
On April 20, 2021, PayPal announced crypto on Venmo. The new feature allows customers to use these three types of cryptocurrency, plus Bitcoin Cash, to view crypto trends and make transactions.
On Sept. 8, PayPal announced a $2.7 billion deal to buy Paidy, a Japanese payments platform for buy now, pay later financing plans.
On Oct. 25, the company said it is not pursuing an acquisition of Pinterest (PINS) at this time. According to Bloomberg, PayPal had discussed acquiring the company for a potential price of around $70 a share.
On Nov. 17, Bernstein downgraded the stock from outperform to market perform and lowered the price target from 260 to 220. Shares tumbled over 5% in response.
On April 13, the company announced that Chief Financial Officer John Rainey plans to leave PayPal for Walmart (WMT). Rainey will remain at PayPal until late May, the company said.
“John Rainey’s departure may be perceived as negative signaling. (It) could potentially refresh fears around the company’s ability to sustain above-market growth and reach financial targets,” Morgan Stanley analyst James Faucette said in a report to clients.
Is PYPL Stock A Buy Right Now?
PayPal stock tumbled more than 7% Wednesday, trading at 96.08. On March 8, the stock hit a 52-week low at 92.25.
PayPal triggered the 7%-8% loss rule from its 296.11 buy point in a cup with handle amid sharp losses in August 2021, according to IBD MarketSmith chart analysis, so the stock is not a buy right now. There is no new buy point at this time with the stock more than 65% off its 52-week high.
For more leading stocks and 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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