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Paypal share price forecast: upside ahead from sustainable catalysts

By Jayson Derrick

Edited by Alexandra Pankratyeva

14:10, 30 October 2020

Paypal share price forecast

2019 was a great year for Paypal’s stock as the world continued to shift towards online payments. Younger consumers entering the workforce also demanded alternatives to boring and outdated banks. However, the case for continued strong Paypal stock performance in 2020 and beyond is based on expectations for Paypal to outperform versus past performance, as this would confirm strong momentum and sustainable growth.

Encouragingly, two quarters into 2020 and the Paypal stock outlook couldn’t look any brighter.

Momentum in early 2020

The company’s first quarter report on May 6 confirmed that several key metrics had accelerated growth from 2019. At a time of uncertainty, this reassured investors and gave everyone reason to hold a favourable Paypal stock price forecast.

April 2020 revenue grew by around 17 per cent, up from 15 per cent growth in all of 2019. Paypal recorded a staggering 7.4 million net new active accounts, with April growth coming at 135 per cent.

During the second quarter, revenue accelerated again, growing by 22 per cent. In fact, Paypal added 21.3 million net new active accounts in the second quarter, making it its strongest quarter in history.

The strong momentum to start the year prompted management to revise its full-year 2020 revenue growth outlook to 20 per cent. Management gave investors another reason to invest in Paypal stock as it said it should add 70 million net new accounts in 2020, nearly double the 37.3 million additions in 2019. 

This may beg the question: is the recent Paypal stock analysis merely capitalising on near-term trends, or is Paypal setting the foundation for years of Paypal stock forecast upside?

Let’s take a look at some of Paypal’s drivers of growth so far in 2020 to see if it warrants a strong Paypal share price forecast.

Paypal share price forecast 2021

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Winning a brand new segment

The Covid-19 pandemic certainly caught the world by surprise, and many jurisdictions worldwide suggested or even mandated older people above 50 stay home. This created a new necessity for older people to find online solutions to solve their banking problems.

Paypal was a major beneficiary of the demographic that sought online options to their financial needs. Paypal CFO John Rainey said in early May that people over 50 represented its fastest-growing segment from March to April.

Investors looking for companies that are showing no impact from the pandemic found one in Paypal, as the company noted total payment volume recovered back to pre-Covid levels.

What’s even more encouraging for anyone modelling Paypal stock predictions is that the company believes its new group of customers represents “sustainable trends” in its business.

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Cashing in on crypto

Paypal announced in late October a completely new service that lets users buy, sell, and hold cryptocurrencies directly in their Paypal accounts. The payments company hopes to play a leadership role in increasing cryptocurrency’s utility by making it, as the company says, “available as a funding source for purchases” at its tens of millions of merchants.

But does this bode well for a bullish Paypal share price forecast? After all, Paypal is far from the first company to launch a cryptocurrency service, so why should this change the Paypal stock forecast narrative for the better?

What’s different is that Paypal’s Venmo platform boasts 300 million active users, and its status as a millennial-favourite makes it an ideal target group for Bitcoin adoption. Or, perhaps Paypal is in the early stages of evaluating how it can best launch its own digital currency that could rival Bitcoin? Wouldn't that be a strong catalyst?

Paypal CEO: world has accelerated to digital

Paypal CEO Dan Schulman made the case for why everyone should hold a bullish Paypal stock price forecast in a CNBC interview when he maintained that “the world has accelerated from physical to digital across almost every industry”.

The shift is taking place even among some of the most unsuspecting industries and Paypal is there to provide solutions. For example, healthcare is shifting online towards telehealth solutions; education is shifting towards remote learning; and restaurants that focus solely on in-person dining could be doomed to fail.

“Across every industry, we are seeing a surge towards a digital-first strategy. And all of the tools and products and services that we offer are probably more relevant and important across multiple industries than they have ever been before.”

Banks loss is Paypal’s gain

CNBC’s Jim Cramer presented an interesting PYPL stock prediction that isn’t based on the company itself. According to the TV pundit, Wall Street pros and individual investors have no desire to own bank stocks. The global economy is in such an uncertain and unclear state and investors are looking for another form of financial exposure.

The pattern has played out in recent weeks and, if past history offers a glimpse of future trends, the answer is clear to the hotly debated Paypal stock buy or sell question. Simply put, whenever bank stocks go down, Paypal’s stock goes up. After all, Paypal is a “bank-like” company that is devoid of any of the credit risk major Wall Street banks are known for.

PayPal

Conclusion: don’t forget the bearish Paypal share price forecast outlook

At some point, even the strongest performing stocks need to take a breather. Some Wall Street insiders recognised the need to move to the sidelines in their PYPL stock predictions. One analyst is BTIG Mark Palmer, a former Paypal bull who downgraded the stock in late June to Neutral.

The analyst acknowledged the obvious that Paypal is a clear beneficiary of the shift in consumer behaviour. It’s not that anyone is arguing against Schulman’s thesis that the world is moving towards digital, rather the analyst has an issue with the stock’s valuation.

The stock at the time of the downgrade was trading at 35 times consensus fiscal 2022 adjusted earnings. The multiple accurately and fairly reflects the strong outlook that everyone is expecting, so the stock may have little room to continue moving to the upside.

Palmer further argued his thesis could be wrong or ill-timed if Paypal gains market share in physical stores or provides a timeline when its Venmo business could become profitable. As of the end of October, there is little reason to believe the company is improving the narrative on these two issues.

Read more: Stellar Lumens price prediction: will it show an ‘interstellar’ rally in 2021?

Markets in this article

PYPL
PayPal Holdings (Extended Hours)
85.13 USD
0.45 +0.530%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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