E-commerce firm PayPal Holdings (PYPL) is the IBD Stock of the Day on hitting an all-time high after a recent breakout from a cup base. PayPal stock has advanced since it joined rival Square (SQ) in allowing customers to buy, sell and hold cryptocurrency Bitcoin.
PayPal stock hit an all-time high of 223.16 in intraday trading on Monday before pulling back a bit to 221.89, up 3.7% in recent action. With Monday’s gain, PayPal stock moved back above a cup-base buy point of 215.93.
However, investors should consider a 220.67 entry point as more appropriate. PayPal stock began consolidating after hitting a new high on Dec. 1.
PayPal stock bulls expect online penetration of total retail spending to continue growing this holiday shopping season during the coronavirus pandemic.
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Shares in PayPal fell when it reported third-quarter earnings in October and it opted not to provide preliminary 2021 guidance.
PayPal Stock Rallies On Cryptocurrency Trading Service
However, PayPal stock rallied on the launch of its cryptocurrency trading service in late November.
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.
At Deutsche Bank, analyst Bryan Keane expects upside.
“A recent PYPL survey revealed 54% of PYPL users have interest in its crypto offerings and we believe there has been strong interest in demand thus far,” said Keane in a recent report.
He added: “Even more powerful is the frequency of visits to the PYPL commerce portal from crypto users, which will lead to higher customer engagement and more monetizable transactions.”
Since its spinoff from eBay (EBAY) in 2015, PayPal has evolved from a payment button to a broad payments services provider, while expanding from online checkout to mobile payments.
The PayPal checkout technology has over 361 million users. The e-commerce firm also has 28 million merchants on its payment network.
TPV Growth A Key Financial Metric
Aside from earnings and revenue growth, the key financial metric for PayPal stock is total payment volume. In the September quarter, TPV rose 38% to $247 billion amid the coronavirus lockdowns. Analysts had projected TPV of $232.2 billion.
For the December quarter, PayPal forecast TPV growth in the low- to mid-30% range. PayPal reports fourth-quarter earnings in late January.
PayPal now garners less than 10% of TPV from former parent eBay. Online marketplace eBay is shifting its payment processing to Netherlands-based Adyen.
EBay has said it expects “a majority of its Marketplace customers” to shift to Adyen by July 2021.
PayPal has offset the loss of eBay’s TPV in part from Venmo, a money-transfer service for family and friends.
PayPal Stock: Venmo Digital Wallet Redesign
Venmo, with 65 million users as of Sept. 30, is expected to generate $900 million in revenue in 2021 and reach profitability in 2022, according to PayPal.
Venmo currently garners most of its revenue from its “Instant Deposit” feature. It collects a small fee when users transfer funds into a debit card or bank account. A redesigned digital wallet due out in mid-2021 expected to add new revenue streams.
Venmo’s rivalry with the Square Cash App has heated up.
In 2018, Square enabled Cash App users to buy and sell Bitcoins.