PayPal (PYPL) is one of the biggest winners of the COVID-19 pandemic. The stock dipped below $100 as the pandemic first started yet it bounced right back within months, eventually tripling in value.
Check out PYPL’s one-year chart and you will find the stock has steadily increased over the past year. Yet, in recent months, PYPL’s stock price has corrected by about 25% along with many other tech stocks.
Is PYPL a Buy, Sell or Hold? Let’s find out.
If you conduct any type of business on the internet, there is a good chance you have a PYPL account. However, PYPL makes money in ways aside from processing transactions. PYPL also generates revenue by extending lines of credit to business owners. PYPL is even embracing cryptocurrencies such as Bitcoin, setting the stage for the business to be future-proof. Though society might not fully shift to a digital currency such as Bitcoin, PYPL is well-positioned should such a transition occur down the line.
PYPL also drives revenue through Venmo, its peer-to-peer payment subsidiary. Venmo is a PYPL growth driver though it might not hold strong amidst fierce competition in the peer-to-peer payment space in the years ahead. As time progresses, that many more businesses are likely to implement payment features through PYPL simply because the company’s footprint continues to expand.
How the Analysts View PYPL
PYPL is one of Wall Street’s favorites. The analysts are projecting a nearly 25% upside for the stock. All in all, the average analyst price target for PYPL is an impressive $308.19. The highest analyst target price for the stock is $375 while the low is $175.
Of the 48 analysts who have issued recommendations on PYPL, 17 consider it a Strong Buy, 25 consider it a Buy, and 6 consider it a Hold. No analysts consider PYPL to be a Sell or Strong Sell.
PYPL POWR Ratings
PYPL has an overall POWR Rating of C. The stock has B grades in the Sentiment, Momentum, and Growth components of the POWR Ratings. If you are curious as to how PYPL fares in the Quality, Stability, and Value components, you can find out by clicking here.
Of the 49 publicly traded companies in the Consumer Financial Services space, PYPL is ranked 28th. This industry has an overall POWR Ratings grade of C. You can learn more about the stocks in the Consumer Financial Services sector by clicking here.
Buy, Sell or Hold?
PYPL has a forward P/E ratio of 54.13. This is a fairly high figure, even for a tech stock such as PYPL. The elevated forward P/E is that much more concerning because PYPL is currently trading around $55 away from its 52-week high of $309.14. In plain English, it appears as though PYPL might be slightly overvalued at its current trading price. Investors may take some of their profits off the table following the stock’s epic run during the ongoing pandemic, choosing to jump ship before the economy returns to normal. If investors take their profit and run, PYPL will drop, potentially down toward the $220 level.
PYPL is also underwhelming in the context of the POWR Ratings. The stock has a C grade. Furthermore, most investors would assume PYPL would rank in the top 10% of its sector’s stocks. However, PYPL is not even ranked in the top half of the 49 companies that comprise the Consumer Financial Services industry.
Though PYPL’s leaders certainly deserve credit for having the foresight to complete transactions in cryptocurrency, regulations are inevitable. No one knows the true potential of crypto. The federal government may eventually put its foot down on all cryptocurrencies, choosing to put regulations on them which could make them less attractive for investors.
Therefore, I believe PYPL should be viewed as a Hold at its current price. I recommend waiting for a pullback in this high-flying stock before considering establishing a position.
PYPL shares rose $3.63 (+1.42%) in premarket trading Thursday. Year-to-date, PYPL has gained 10.70%, versus a 9.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More…
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