Earlier this month PayPal came out with its Q1 earnings report 2020 delivering mixed results due to the Covid-19 outbreak. Investors have been preoccupied that the impact of the global pandemic on international cross-border e-commerce would hurt payment providers like PayPal.
Indeed, since the outbreak worsened internationally and social distancing became a new normal, PayPal “saw a substantial revenue decline predominately in travel and transportation verticals”, Chief Executive Officer Dan Schulman shared in a conference call with analysts. The company’s partners, including Airbnb and Uber Technologies, shared a drastic decline in transaction volumes.
In contrast, PayPal’s April statistics look much better. The company’s revenue surged about 17 per cent in April and the total volume of payments grew 22 per cent. Moreover, PayPal added 7.4 million new accounts. On May 1, the fintech giant reached a new milestone – it had the largest single day of transactions in history, larger than last year's transactions on Cyber Monday or Black Friday.
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PayPal stock outlook Q1 2020: solid results as the economy rapidly changes
Overall, international e-commerce platforms and payment services have performed well even when businesses shut down and consumers tightened their spending. In his interview Dan Schulman observed that “the world has kind of moved from physical to digital, and digital payments have gone from a nice-to-have capability to a must-have service”.
Still, PayPal posted weaker-than-expected results for the first quarter of 2020 and also withdrew its full-year revenue and earnings forecast amid elevated uncertainty. The company’s revenue gained 12 per cent to reach $4.62 billion in three months ending March 31, compared to $4.72 billion estimated by analysts.
Total payment volumes for the Q1 grew 19 per cent from the previous year to $191 billion. This again was a bit less than the projected average of $193.2 billion. PayPal shared sales growth of almost 13 per cent.
The company came out with earnings results of $0.66 per share, which is less than the Zacks Consensus Estimate of $0.75 per share. Over the last four quarters, PayPal has surpassed consensus EPS estimates three times.
PayPal stock analysis: 16% growth since the beginning of 2020
According to the latest PYPL stock news, the shares initially dropped after the released earnings results, but almost immediately rebounded as Schulman shared a more optimistic view of the current quarter results during the earnings call.
On Wednesday, May 6, the stock soared in extended trading after closing at a new record high of $128.31 in New York. On Thursday morning, it was traded as high as $145.08, up 13 per cent.
In April, PayPal’s revenues grew by 20 per cent and net new active users hit a record high, surging over 140 per cent compared to January and February 2020. This accounts for 250,000 net new accounts per day. The company forecasts a significant recovery in payments volume in the second quarter, anticipating from 15 to 20 million new active accounts in Q2 2020.
During the first quarter 2020, PayPal repurchased almost 7.5 million shares of common stock, returning $800 million to stockholders. Partly driven by the buyback, PYPL shares have surged about 16 per cent year to date versus the S&P 500's dropdown of -11.2 per cent.
For those willing to invest in PayPal stock it may signal that the shares are expected to surge further this year. Let’s move on to the analysts’ estimates and draft a comprehensive PayPal stock forecast 2020.
PayPal share price forecast: what is next for PayPal?
The incredibly strong PayPal stock performance after the release of its first-quarter result shows that investors liked what they saw in the report despite the missed analysts’ expectations.
According to TipRanks’ latest PayPal stock forecast, based on 25 analysts offering year-long price targets, the average price target for PYPL is $142,87, which represents a 1.14 per cent decline from the last price of $144.50 and is 2.94 per cent lower from its 52-week high of 147.20.
The highest analysts’ price target for the next 12 months is $172.00, while the lowest expected price is $120.00.
According to the most recent PayPal share price forecast by Walletinvestor, offering a 12-month price prediction, PayPal stock can be an acceptable long-term investment. They believe PayPal shares can bring good returns and become a profitable investment option. Based on their forecast, PYPL stock price can reach $152.82 in a year.
PayPal news and fundamentals: the evolution of digital payments
Speaking of the PayPal stock forecast, let’s get back to its fundamentals. The payments giant has been boasting a consistent track record of earnings growth since 2010. The company’s fundamental strength is proved by its EPS Rating, which is a solid 92 out of highest-possible 99. This rating measures the company’s capability to increase profits year over year.
Among the most notable events, which may contribute to positive PayPal stock prediction, is the recent acquisition of Honey for over $4 billion. From 20.2 million new active PayPal accounts in the Q1 2020, 10.2 million were added in January from Honey. The service helps clients to find discounts for online purchases, automatically aggregating online coupons on e-commerce websites.
In April, Honey's new actives grew nearly 180 per cent from pre-Covid levels, which resulted in a 40 per cent increase in revenue compared with January and February levels.
In December 2019, PayPal extended its partnership with Citigroup and enabled the bank’s institutional clients to make payments into users’ PayPal wallets. This arrangement provides PayPal and Citigroup’s customers with even wider choice of payment methods, making global payments more fast and flexible.
As consumer spending increased in April on lockdown, e-commerce activity fully offset weakness in spending on events and travel, which may result in a bullish PayPal stock price forecast for the rest of 2020.
PayPal stock: buy or sell
Should I buy PayPal stock? The overall PayPal stock forecast seems to be on the upside, as both the stock and the underlying business seem to back analysts’ decision to rate the stock as a strong buy.
In this regard, out of 25 analysts surveyed by TipRanks, 24 of them believe that the stock is a buy even after considering the potential economic impact of the coronavirus pandemic.
Don’t forget that with contracts for difference, it does not matter whether your view of the PayPal stock forecast 2020 is positive or negative. You can always try to profit from any future price fluctuations, regardless of their direction by taking a long or a short position respectively. Follow the latest stock market news and track the PYPL live rates with Capital.com.