PayPal Top Earnings Forecasts, Bets on Crypto

PayPal Holdings, Inc. (PYPL) shares rocketed over 4% higher in Wednesday’s extended-hours trading session after the company delivered a stellar quarterly earnings report.

The San Jose digital payments giant reported an adjusted first quarter (Q1) profit of $1.22 per share, blowing pasts Wall Street’s expectation of $1.01 a share. Moreover, the bottom line grew 85% from a year earlier. Revenues for the period came in at $6.03 billion, up from year-ago sales of $4.62 billion. Volume and user metrics also impressed, with the company processing $285 billion in the quarter and adding 14.5 million net new active accounts.

Looking ahead, management forecasts Q2 EPS of $1.12 on revenues of $6.25 billion. Analysts had expected earnings of $1.10 on sales of $6.16 billion. The company sees cryptocurrency continuing to drive growth in upcoming quarters. “We’ve got a tremendous amount of really great results going on tactically with our crypto efforts,” CEO Dan Schulman told investors, per CNBC. PayPal initially introduced leading cryptocurrencies to its platform last October and has progressively added more integration with digital assets over the past six months.

Through Wednesday’s close, PayPal stock has a market capitalization nearing $300 billion and trades nearly 100% higher over the last 12 months. YTD, the shares have added 5.64%, which trails the S&P 500’s gain of 11% over the same period.

Wall Street View

Late last month, Rosenblatt Securities analyst Sean Horgan raised his price target on the stock to $350 from $320 and maintained his ‘Buy’ recommendation. Horgan sees the payments giant continuing to benefit from higher levels of consumer spending, fueled by record levels of government stimulus.

Elsewhere, the stock racks up mostly favorable brokerage coverage. It receives 36 ‘Buy’ ratings, 5 ‘Overweight’ ratings, and 6 ‘Hold’ ratings. Just one analyst recommends selling the shares. Wall Street has a 12-month price median price target on the stock at $314.55. This represents 27% of upside from yesterday’s $247.40 close.

Technical Outlook and Trading Tactics

PayPal shares have recently retraced to a multi-month uptrend line extending back to the March 2020 pandemic-induced low. Although the price broke below this closely-watched indicator in Wednesday’s session, pre-market trading indicates a move back above it after the company’s solid earnings report.

Providing the stock closes above the trendline, active traders should anticipate a retest of the YTD high at $309.14. Protect capital with a stop-loss order placed under today’s low.

For a look at today’s earnings schedule, check out our earnings calendar.

PayPal Stock Sees Big Money Buying

This comes just months after they gave PayPal users crypto trading privileges. Talk about moving into a very hot space. Whether you like it or not, bitcoin and other cryptocurrencies are here to stay.

And I think it’s a great move by PayPal. They are quickly becoming a big player in that landscape.

This sets up well for the stock going forward. But there’s another story going on that points to more upside. The Big Money has been crazy about the shares…for years.

You see, smart money managers are always looking to bet on the next outlier stocks…the best in class. They spend countless hours sizing up companies, reading reports, speaking to analysts…you name it. When they find a company firing on all cylinders, they pounce in a big way.

That’s why I’ve learned how critical it is to gauge Big Money demand for shares. To show you what I mean, have a look at all of the big money signals PYPL has made the last year.

Up until February, each green bar signals big trading volumes as the stock ramped in price:

Source: www.mapsignals.com, End of day data sourced by Tiingo.com

In 2021 alone, PYPL made 8 of these rare signals. Generally speaking, that means more upside is ahead.

Now, let’s check out a few technicals grabbing my attention:

  • 1 year outperformance vs. market (+67.26% vs. SPY)
  • 1 year outperformance vs. Financials ETF (+50.63% vs. XLF)

Outperformance is huge for leading stocks.

Next, it’s a good idea to check under the hood. Meaning, I want to make sure the fundamental story is strong too. As you can see, PayPal has been growing sales and earnings at a breakneck pace. Take a look:

  • 3-year revenue growth rate (+17.96%)
  • 3-year earnings growth rate (+36.06%)

Source: FactSet

Those are killer growth rates. Marrying great fundamentals with technically superior stocks is a winning recipe over the long-term.

In fact, PayPal has been a top-rated stock at my research firm, MAPsignals, for years. That means the stock has buy pressure, strong technicals, and awesome fundamentals. We have a ranking process that showcases stocks like this on a weekly basis.

Since 2016, PYPL has been a constant Big Money favorite. And since its first appearance on this report, it’s up +560%!

Source: www.mapsignals.com, End of day data sourced from Tiingo.com

Let’s tie this all together.

PayPal continues to fire on all cylinders technically and fundamentally. The latest news of allowing Venmo users to transact in crypto is encouraging to their growth story. I like the long-term story of the stock.

The Bottom Line

The PayPal rally likely has further upside. Big money buying in the shares is signaling to take notice. Shares could be positioned for a bounce soon. Given the historical gains in share price and strong fundamentals, this stock could be worth a spot in a growth-oriented portfolio.

Disclosure: the author holds a long position in PYPL in personal and managed accounts at the time of publication.

Learn more about the MAPsignals process here.

Will Earnings Season Bring Volatility To The Stock Market?

The Commerce Department last week reported that the U.S. economy grew at a +6.4% annual rate in the first quarter, slightly below estimates but still strong. If it would have come in real hot and much higher bears would have pointed to fanning the inflation flames even further.

This mindset of “bad-news-could-be-good-news” is helping to keep the stock market at or near all-time highs. If economic data somewhat disappoints it means the Fed stay dovish and accommodative for longer.

Fundamental analysis

That might be important to keep in mind as April data starting this week is expected to be extremely good. The April Employment Report is due next Friday and with upper-end of Wall Street estimates look for upwards of +1 million new jobs being added. Other key April data next week includes the ISM Manufacturing Index on Monday, and the ISM Non-Manufacturing Index on Wednesday.

employment

If the data comes in better than expected the bears will win the nearby battle and have the upper hand when talking higher inflation and the Fed perhaps tightening sooner than anticipated. So this week could be a bit tricky whereas “disappointing-data” could actually be digested as a win for the bulls and “strong data” a win for the bears.

The earnings calendar is packed again next week with big names including Activision Blizzard, Adidas, AllState, Cerner, Cigna, CVS, Dominion Energy, Enbridge, Etsy, Hilton Worldwide, Moderna, Monster Beverage, Nintendo, PayPal, Peloton, Pfizer, Rocket Companies, Square, TMobile, Wayfair, and Zoetis.

COVID-19

Checking in on U.S. progress against Covid-19, the number of adults that have received at least one dose is around 60%-65%, depending on the source. Global cases continue to rise led by India, where new infections have been hitting new record highs every day for weeks now. The country reported a staggering 380k new infections and 3,645 new deaths on Thursday while less than 10% of the population has been vaccinated.

Bottom line, the global restart will not be synchronized like many bulls had hoped would be the case and global growth may continue to struggle. At the moment the U.S. market doesn’t seem to care. It will be interesting to see if increasing inflation and continued global headwinds will eventually come home to roost.

SP500 technical analysis

SP500 earnings season

Earnings season can bring volatility to the stock market. At the beginning of May, cycles turn to the downside. Note, this is only a timing tool and it never shows the amplitude or strength of the move. When cycles are topping, it means we can expect a move down or choppy trading. This is it.

But relying on cycles only is not a good idea. Insider Accumulation Index shows bearish divergence on a daily chart. At the same time, Advanced Decline Line is still strong. The key resistance is around 4250 at the moment. I believe earning season can bring a profit booking to the stock market. If that happens, watch 4000 – 39500. It was a massive resistance and now it might turn into support. Intermarket Forecast is neutral. But if it turns to the downside, we will finally see a pullback in SP500.

For a look at all of today’s economic events, check out our economic calendar.

PayPal Rangebound Ahead of Wednesday Report

PayPal Holdings Inc. (PYPL) reports Q1 2021 earnings after Wednesday’s closing bell, with analysts looking for a profit of $1.01 per-share on $5.9 billion in revenue. If met, earnings-per-share (EPS) will mark a 53% increase in profit compared to the same quarter last year. The stock surged 7.4% in February after beating Q4 2020 top and bottom line estimates but topped out a few sessions later and has been rangebound since that time.

Fintech Leadership Grows

The company benefited from 2020’s acceleration into digital transactions, posting a phenomenal 116% annual return. It’s added another 12% so far in 2021, with a surging U.S. economy and bullish fintech sentiment adding to the list of tailwinds. It’s now a recognized market leader in digital wallets, highlighted by this week’s news that Coinbase Global Inc. (COIN) will allow customers to buy crypto using debit and credit cards linked to their PayPal accounts.

Rosenblatt Securities analyst Sean Horgan called PayPal one of his top digital payment picks last week, maintaining a ‘Buy’ rating while raising the firm’s price target from $320 to $350. He’s looking for 30% upside compared to mid-April price levels, with the Venmo mobile payment division set to exceed a $900 million 2021 revenue target due to the surge in spending generated by massive stimulus in the United States.

Wall Street and Technical Outlook

Wall Street bulls have been pounding the tables since the second quarter of 2020, yielding a current ‘Buy’ rating based upon 36 ‘Buy’, 5 ‘Overweight’, 6 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets now range from a low of $241 to a Street-high $375 while the stock closed Friday’s U.S. session more than $50 below the median $313 target. This low placement raises odds for a high percentage rally if earnings exceed expectations this week.

PayPal broke out above the 2019 high at 121.48 in May 2020 and entered a powerful trend advance that stalled just above 200 in September. Bullish action cleared that barrier in December, yielding a vertical rally impulse that posted an all-time high at 309.14 in February. The subsequent downdraft found support at 223 in March while price action since that time has been stuck within those boundaries, which are likely to persist through the second quarter.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

PayPal’s Venmo Launches Crypto Buying and Selling

By Anna Irrera

Venmo users will be able to buy bitcoin, Ethereum, Litecoin and Bitcoin Cash for as little as $1 and publish transactions on the app’s feed, the company said.

With more than 70 million customers, Venmo is one of the most popular payment apps in the United States, especially among younger consumers who use it to pay friends and family. It processed around $159 billion in payments last year.

California-based PayPal has become one of the most active mainstream financial companies in cryptocurrencies.

In October, it began allowing users to buy, sell and hold cryptocurrencies in its digital wallets and last month it started allowing customers to spend their virtual coins at millions of merchants globally.

These launches helped to fuel a rally in virtual currencies. Bitcoin has soared nearly 90% since the start of this year, boosted by interest from larger financial firms betting on its greater adoption and use as a hedge against inflation.

Venmo’s crypto launch also coincides with increased competition in the U.S. peer-to-peer payments sector.

Square Inc’s rival Cash App, which has allowed cryptocurrency purchases since 2018, has seen user growth boom over the last year. Other financial technology startups popular with young consumers, such as broker Robinhood also allow crypto buying and selling.

More than 30% of Venmo customers have purchased crypto or equities, 20% of which started buying during the pandemic, the 2020 Venmo Customer Behavior Study found.

“Our goal is to provide our customers with an easy-to-use platform that simplifies the process of buying and selling cryptocurrencies and demystifies some of the common questions and misconceptions that consumers may have,” Darrell Esch, Venmo senior vice president and general manager, said.

Crypto on Venmo is enabled through PayPal‘s partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services.

(Reporting by Anna Irrera; editing by Barbara Lewis)

Bitcoin Analysis. BTC has to Surge, Here is Why.

This year Bitcoin had the second best performing March ever in the history of Bitcoin, the first was 8 years ago when Bitcoin gained 178.70%. Overall, the first quarter of 2021 was Bitcoin’s best quarter in terms of gains. However a massive sell-off which started on March 24 played havoc with the bullish hoping investors. The sell-off was mainly caused by the end of the Bitcoin futures contracts and options.

Speaking of futures, CME will be launching Bitcoin micro futures this May, which should attract retail investors to the exchange. The BTC micro futures contract will be only 1/10 of the original notional value of BTC. The launch of the BTC micro futures is scheduled for May 3 after the settlement of BTCCJ1 futures and options on the exchange. This move from the CME group might be backed by the fact that Bitcoin inflows from retail investors in Q1 2021 outnumbered the inflow from institutional.

Bitcoin and cryptocurrency payments are being accepted by more and more companies, airBaltic, the first airline to accept Bitcoin payments, has announced that it will expand the cryptocurrency payments and will add Ethereum, Doge, BCH. PayPal enables cryptocurrency payments in millions of stores. As Bitcoin’s transactions increase so does the Bitcoin’s hashrate, and it just hit a record high with more than 166.4M TH per second. The hashrate and the price are strongly correlated, as miners expect a higher reward for the higher computational capacity provided by them. The previous ATH of Bitcoin’s hasrate was on February 9, 2021 when BTC/USD hit $48 142 setting a new high, and after a slight correction set a new straight uptrend, which continued up to February 21 and halted at $58 352. With that being said it is estimated that Bitcoin is entering into a new bull cycle and a new heavy correction based on miners sentiment is expected. Verdict, Bitcoin is bullish.

There issue of Bitcoin polluting the environment due to it’s PoW (Proof-of-work) mechanism remains, and when the number of Bitcoin transactions rise, so will the power to maintain the network. Carbon footprint of Bitcoin is heavily discussed and could force miners to work on safer and carbon neutral Bitcoin mining farms. Such a requirement will force smaller players to leave the mining and larger institutions to invest in clean energy. The state of Kentucky in it’s “Incentives for Energy-related Business” program proposes tax incentives for miners using clean energy for cryptocurrency mining.

First to step in into the carbon free Bitcoin movement are Argo Blockchain and DMG Blockchain Solutions, which have signed a memorandum of understanding to build the first carbon-neutral mining pool. The pool will be powered solely by the hydroelectric power, which has lesser emissions. This is to avert fears of Bitcoin getting banned due to its carbon emissions. Stricter regulations – yes, increasing scarcity – yes, increasing investment – yes, ban – no. This could be a good opportunity for developing countries that have great water resources to invest into providing clean energy for the evolving cryptocurrency industry. Verdict, Bitcoin is bullish.

As for the chart analysis, Bitcoin resumed uptrend after a sell-off of March 24. BTC/USD on Overbit is currently traded at $57 626 and is above the dynamic resistance of March 14 and the current All-time-high at $61 677.

Bitcoin price on Overbit

Bitcoin’s uptrend was rejected by a strong resistance at $59 280 yesterday, the drop continued today until BTC tested the dynamic resistance and support and retraced. There are two scenarios to watch for the upcoming price action.

The first is – Bitcoin bulls do not get enough momentum and bears bring down the price to the support zone at $54 450 – $54 100 levels, where bulls regain power to push the price upwards, forming a perfect Inverted Head and Shoulders pattern and testing the MA200 as support. This scenario is supported by RSI and MACD indicators,

Bitcoin price on Overbit

The second, bulls push the price upwards break above the $59 290 resistance and Bitcoin tests $62 300 and sets a new all-time-high at $65 000. This scenario is supported by the current price action and the last candle formed on a 4H chart. The candle reads that buyers are not giving up and were able to push the price higher. The current price is also above the dynamic resistance and above EMA50 and MA100.

Bitcoin price on Overbit

It is important to note that the confirmation of the bullish continuation will be signalled by closing above the $59 290 resistance.

PayPal Shares Trade Flat Despite Launching Crypto Payments

PayPal Holdings, Inc. (PYPL) edged 0.37% higher Wednesday after the digital payments company launched its highly anticipated cryptocurrency checkout service.

U.S. customers who hold leading digital currencies Bitcoin, Ethereum, Bitcoin Cash, and Litecoin in their PayPal wallet will now be able to convert holdings into fiat currencies at participating merchants to make purchases. “This is the first time you can seamlessly use cryptocurrencies in the same way as a credit card or a debit card inside your PayPal wallet,” CEO Dan Schulman told Reuters.

The company, which plans a full rollout across its 29 million merchants within the coming months, first announced its foray into digital currencies late last year, initially only allowing users to buy, hold, and sell leading cryptocurrencies. The latest development comes within the same week that Tesla, Inc. (TSLA) CEO Elon Musk said U.S. customers can now purchase Tesla cars with Bitcoin and rival Visa Inc. (V) announcing that it facilitates settling transactions in USD Coin (USDC) – a stable coin backed by the U.S. dollar.

Through Wednesday’s close, PayPal stock has a market value of $277 billion and trades mostly flat since the start of the year. However, the shares have gained around 145% over the past 12 months. Valuation-wise, the stock looks a little pricey, trading 53% above its five-year average forward earnings multiple of 34 times.

Wall Street View

In January, BTIG analyst Mark Palmer upgraded PayPal to ‘Buy’ from ‘Neutral’ and placed a $300 price target on the shares. Palmer told clients that PayPal’s crypto initiative could add more than $1 billion to PayPal’s annual revenues in 2022. The analyst also argues that a shift to digital payments during the pandemic should continue in 2021 and propel the payment processer’s long-term growth trajectory.

Sentiment elsewhere on Wall Street remains bullish. The stock receives 35 ‘Buy’ ratings, 5 ‘Overweight’ ratings, and 7 ‘Hold’ ratings. Just one sell-side analyst recommends selling the shares. Twelve-month price targets range between $241 and $375, with the median pegged at $310.

Technical Outlook and Trading Tactics

Despite most analysts expecting further upside, the PayPal chart indicates short-term weakness that could see the shares fall. Over the first three months of the year, the stock has formed a head and shoulders pattern – a formation that often signals a top.

Active traders would be better to look for buying opportunities near $212.5, where the price finds a confluence of support from a multi-month horizontal trendline and the rising 200-day simple moving average (SMA). Those who buy at this level should target a move back up to the pattern’s head at $309.14. Protect capital with a stop-loss order placed below the psychological $200 level.

For a look at today’s earnings schedule, check out our earnings calendar.

Exclusive: PayPal Launches Crypto Checkout Service

By Anna Irrera

Customers who hold bitcoin, ether, bitcoin cash and litecoin in PayPal digital wallets will now be able to convert their holdings into fiat currencies at checkouts to make purchases, the company said.

The service, which PayPal revealed it was working on late last year, will be available at all of its 29 million merchants in the coming months, the company said.

“This is the first time you can seamlessly use cryptocurrencies in the same way as a credit card or a debit card inside your PayPal wallet,” President and CEO Dan Schulman told Reuters ahead of a formal announcement.

Checkout with Crypto builds on the ability for PayPal users to buy, sell and hold cryptocurrencies, which the San Jose, California-based payments company launched in October.

The offering made PayPal one of the largest mainstream financial companies to open its network to cryptocurrencies and helped fuel a rally in virtual coin prices.

Bitcoin has nearly doubled in value since the start of this year, boosted by increased interest from larger financial firms that are betting on greater adoption and see it as a hedge against inflation.

PayPal’s launch comes less than a week after Tesla Inc said it would start accepting bitcoin payments for its cars. Unlike PayPal transactions where merchants will be receiving fiat currency, Tesla said it will hold the bitcoin used as payment.

Still, while the nascent asset is gaining traction among mainstream investors, it has yet to become a widespread form of payment, due in part to its continued volatility.

PayPal hopes its service can change that, as by settling the transaction in fiat currency, merchants will not take on the volatility risk.

“We think it is a transitional point where cryptocurrencies move from being predominantly an asset class that you buy, hold and or sell to now becoming a legitimate funding source to make transactions in the real world at millions of merchants,” Schulman said.

The company will charge no transaction fee to checkout with crypto and only one type of coin can be used for each purchase, it said.

(Reporting by Anna Irrera; Editing by Susan Fenton)

 

Why PayPal Shares Are Down By More Than 20% From Recent Highs?

PayPal Video 08.03.21.

PayPal Expands Its Cryptocurrency Market Presence With The Purchase Of Curv

PayPal shares have declined by more than 20% from highs that were reached back in mid-February amid broad sell-off in the tech space.

Today, the stock found itself under pressure after the company announced that it agreed to buy Curv, a provider of cloud-based infrastructure for digital asset security from Israel. According to recent reports, the deal is valued at less than $200 million.

PayPal has stepped into the cryptocurrency territory back in October 2020 when it announced that it would launch a service that would enable users to buy, hold and sell cryptocurrency.

Bitcoin’s strong start of the year has provided additional support to PayPal shares and pushed them to all-time highs at $309.14. Not surprisingly, the recent pullback in the cryptocurrency market served as a bearish catalyst for PayPal stock, although the main reason for PayPal’s weakness in the last few weeks was the broad weakness of the tech market segment.

What’s Next For PayPal?

PayPal shares have quickly moved into the bear market territory after testing all-time high levels in February, but such moves are common in today’s market.

PayPal stock is trading at more than 40 forward P/E for 2022 so the stock is richly valued by the market. At this point, the main risk for PayPal is the continuation of the sell-off in the U.S. government bond market which will push yields even higher.

As yields rise, investors and traders become concerned about high valuations which is bearish for high-flying tech stocks like PayPal.

At the same time, PayPal has already pulled back by more than 20% from recent highs, so bargain hunters may be interested in the company’s shares. As PayPal is increasing its presence in the cryptocurrency sphere, the dynamics of the cryptocurrency market may have a notable impact on the stock.

For a look at all of today’s economic events, check out our economic calendar.

Mastercard Joins Tesla, PayPal in Crypto Revolution

Payments giant Mastercard Incorporated (MA) announced Wednesday via a company blog that it plans to start supporting select cryptocurrencies directly on its network later this year. The decision comes three months after rival PayPal Holdings, Inc. (PYPL) said it would add select cryptocurrencies to its platform and several days after electric car maker Tesla, Inc. (TSLA) announced in an SEC filing that it has invested $1.5 billion into Bitcoin and plans to accept the pioneer crypto as payment.

Although Mastercard did not disclose which digital currencies it will support, a source familiar with the matter told CoinDesk that digital currency payments would settle in cryptocurrency at participating merchants. Mastercard already has existing partnerships with prominent crypto payment firms Wirex and BitPay but currently requires a conversion of digital currency payments back to fiat currencies on its network.

“Our change to supporting digital assets directly will allow many more merchants to accept crypto — an ability that’s currently limited by proprietary methods unique to each digital asset. This change will also cut out inefficiencies, letting both consumers and merchants avoid having to convert back and forth between crypto and traditional to make purchases,” wrote Raj Dhamodharan, the company’s executive vice president of digital asset and blockchain products.

Through Wednesday’s close, Mastercard stock has a market capitalization of $332 billion, issues a modest 0.53% dividend yield, and trades 6.37% lower since the start of the year.

Wall Street View

Last month, Jefferies analyst Trevor Williams upgraded the stock to ‘Buy’ from ‘Hold’ and raised the firm’s price target to $415 from $315. Williams argues that the company’s cross-border payments division, which accounts for around 25% of total revenues, sits well-positioned to benefit from a recovery in travel after the vaccine rollout.

Mastercard also racks up positive coverage elsewhere on Wall Street. It receives 29 ‘Buy’ ratings, 4 ‘Overweight’ ratings, and 9 ‘Hold’ ratings. Currently, no analysts recommend selling the shares. Look for further brokerage research in the weeks ahead after the company’s latest pledge to brining digital currencies to its platform.

Technical Outlook and Trading Tactics

Mastercard shares have formed a short-term inverse head and shoulders over the past two months, with the pattern’s head finding a confluence of support from the 200-day simple moving average (SMA) and a horizontal trendline. Furthermore, the relative strength index (RSI) sits just above 50, giving the price ample room to test higher prices before consolidating.

Those who buy here should consider setting a take-profit order near the stock’s all-time high (ATH) at $367.25 while managing risk with a stop placed beneath the pattern’s right shoulder at $330.

For a look at today’s earnings schedule, check out our earnings calendar.

U.S. Market Wrap and Forecast for Friday

Major index benchmarks added to weekly gains ahead of the January Non-Farm Payrolls report. The Russell-2000 small cap index outperformed blue chips, lifting more than 2% to an all-time high. Chip stocks added a few points after Wednesday’s reversal while the 30-year Treasury bond stuck its nose above 2.00% for the first time since March 2020. Fintech issues shined after another strong quarter from market leader PayPal Holdings Inc. (PYPL).

Banks Get Bought

Speculative favorite DraftKings Inc. (DKNG) spiked into October resistance, completing the last leg of a 60-point round trip. High short interest small caps continued to deflate, signaling the demise of last week’s biggest story, which doesn’t seem too important in retrospect. Gamestop Inc. (GME) fell another 42% into the low 50s, marking the lowest low since Jan. 22. More importantly, the stock has dropped 89% off the Jan. 28 peak, trapping many Kool-Aid drinkers.

Dow component JPMorgan Chase and Co Inc. (JPM) surged into a test of January’s all-time high but the stock hasn’t broken out yet because it’s still dealing with tough resistance at the 2020 high above 140. This should be a great year for commercial banks worldwide, with the early stages of an inflationary environment widening the yield curve while generating the strongest tailwinds for the financial sector in more than a decade.

Heading Into the Weekend

Wall Street is looking for Friday’s report to add about 50,000 new jobs, much lower than the 174,000 jobs reported in Wednesday’s ADP release. The divergence between expectations and reality is more important than actual metrics at this juncture because everyone knows that millions are still out of work, waiting for restaurants, fitness centers, and travel destinations to rebuild their businesses after the pandemic runs its course.

Major benchmarks hovered around bull market highs at Thursday’s close, raising the potential for breakouts in coming sessions. The Biden administration may need to pull a few legislative tricks to pass the gigantic stimulus bill but the odds are good and Democrats don’t want to make the same mistake they made at the start of the Obama administration. Specifically, the last president made it clear there’s no advantage in seeking ‘unity’ with the other side of the aisle.

For a look at all of today’s economic events, check out our economic calendar.

PayPal Stock Hits New Highs As Q4 Results Beat Estimates

PayPal Video 04.02.21.

PayPal Continues To Grow At A Fast Pace

PayPal shares managed to get to all-time high levels after the release of the company’s fourth-quarter earnings report. PayPal reported revenue of $6.12 billion and GAAP earnings of $1.32 per share, beating analyst estimates on both earnings and revenue.

For PayPal, the year 2020 was the strongest year in its history as it benefited from the trends accelerated by the pandemic. PayPal’s total payment volume grew by 31% in 2020, while revenue increased by 21%. The company also managed to add 16 million net new active accounts (NNAs).

The rapid digitalization of the world served as a major tailwind for PayPal’s business in 2020. This trend is also projected to boost the company’s performance in 2021.

The company expects that its revenue will grow by about 19% in the current year while its adjusted earnings will increase by about 17%. PayPal also expects to add 50 million NNAs as its business continues to grow. Judging by today’s trading dynamics, the market believes that these targets are realistic.

What’s Next For PayPal?

The digitalization trend, which was accelerated by the pandemic, will likely remain strong in the upcoming years, and digital payments firms like PayPal will benefit from this trend.

Currently, analysts expect that PayPal will report earnings of $4.54 per share in 2021, and the stock is trading at a forward P/E of more than 55. The rich valuation is based on market’s expectation of the rapid growth of PayPal’s revenue, earnings and customer base.

If the upcoming earnings reports indicate that this growth is weaker than expected, PayPal shares may find themselves under pressure. In the near term, the stock may continue to attract investors who want to bet on the strong digitalization trend.

In addition, PayPal has recently became more friendly to the cryptocurrency world, which may serve as an additional bullish catalyst in case cryptocurrency market shows strong performance in 2021.

For a look at all of today’s economic events, check out our economic calendar.

PayPal’s Target Price Raised to $229 at Morgan Stanley, Forecasts Q3 Adjusted EPS of $0.94

Morgan Stanley raised their stock price forecast on PayPal to $229 from $210, assigning an “Overweight” rating for the leading global payments company’s stock and predicted third-quarter revenue growth of 25.3% with adjusted EPS of $0.94.

PayPal is scheduled to announce its third-quarter earnings results on Monday, November 2, after market close. The market expectations for EPS is for $0.94.

“We raise our 3Q20 revenue growth forecast to 25.3% from 23.0%, as we contemplate higher TPV growth of 31%. We lower our 3Q adjusted EPS forecast to $0.94 from $0.95 as we assume a slightly lower margin, given reinvestments. For CY20, we look for net revenues of $21,354M (up from $21,274M) due to strength in core PayPal and lower our adjusted EPS estimate to $3.70 from $3.71. In CY21, our total revenues forecast rise to $24,796M (vs. prior MSe of $23,357M) and our adjusted EPS estimate rises by $0.28 to $4.46,” said James Faucette, equity analyst at Morgan Stanley.

“In CY22, we look for a more normalized TPV and revenue growth rate of 23% (ex-FX) and 18%, respectively. We forecast ~75bps of adjusted operating income margin expansion. This results in 22% YoY adj. EPS growth to $5.46. We raise our PT to $229 (from $210), derived from a 42x (NC) multiple on our new CY22 adj. EPS forecast of $5.46,”

PayPal’s shares closed 4.56% lower at $186.13 on Friday; however, the stock is up over 70% so far this year.

Morgan Stanley gave a target price of $277 under a bull scenario and $113 under the worst-case scenario. Other equity analysts also recently updated their stock outlook. Citigroup boosted their target price on shares of PayPal to $218 from $186 and gave the company a “buy” rating in July. Wells Fargo & Company boosted their target price to $215 from $200 and gave the company an “overweight” rating. Jefferies Financial Group boosted their target price to $230 from $210 and gave the company a “buy” rating.

Fifteen analysts forecast the average price in 12 months at $228.27 with a high forecast of $290.00 and a low forecast of $201.00. The average price target represents a 22.64% increase from the last price of $186.13. From those 15, 14 analysts rated “Buy”, one rated “Hold” and none rated “Sell”, according to Tipranks.

“PayPal, one of our top OWs, is the preferred digital wallet option for non-Amazon merchants, as evidenced by its online acceptance lead vs. other digital wallets and industry-low attrition. PayPal’s efforts to offer a seamless and secure checkout experience ties its TPV growth rate with the secular growth of eCommerce,” Morgan Stanley’s Faucette added.

“As consumers increase their habitual use of PayPal, the company should grow its TPV at or above the rate of eCommerce (ex-Amazon). Venmo, POS and partnership monetization could offer additional TPV and revenue growth, while operating leverage from its scale support 20%+ earnings growth over the medium term, despite near-term headwinds from eBay and macro impacts.”

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PayPal Rockets to All-Time High After Adding Cryptocurrencies

PayPal Holdings, Inc. (PYPL) shares surged 5.5% to a new all-time high (ATH) Wednesday after the digital payments company announced it plans to introduce cryptocurrencies to its platform. The firm said that it will initially allow U.S. customers to buy, hold and sell Bitcoin, Bitcoin Cash, Ethereum and Litecoin within their PayPal wallet in the coming weeks, followed by the ability to purchase goods and services using cryptocurrencies by early next year.

Management believes the company’s move into digital currencies will significantly increase their utility. “Consumers will be able to instantly convert their selected cryptocurrency balance to fiat currency, with certainty of value and no incremental fees,” the company said, per MarketWatch. PayPal also indicated that it wants to work alongside central banks and regulators to help share digital currencies’ role in the future of online payments.

As of Oct. 22, 2020, PayPal stock has a $250 billion market capitalization and is up nearly 100% on the year. In the past three months alone, the shares have added over 20%. By comparison, over the same periods, the Nasdaq Composite has risen  28% and 7.27%, respectively. From a valuation standpoint, the stock trades at a 42% premium to its five-year average forward earnings multiple of around 32 times.

Wall Street View

Barclays analyst Ramsey El-Assal raised the bank’s price target on PayPal yesterday to $235 from $228 and reiterated his ‘Overweight’ rating on the shares. EL-Assal sees COVID-related tailwinds supporting the company as e-commerce sales remain at elevated levels, despite easing slightly quarter-over-quarter. Meanwhile, Wolfe Research’s Darrin Peller told clients in a research note that the move into cryptocurrency “represents among the more import steps for crypto utility/normalization we have seen in years.”

Elsewhere on Wall Street, analysts remain overwhelmingly bullish on the stock. It receives 34 ‘Buy’ ratings, 3 ‘Overweight’ ratings, and 6 ‘Hold’ ratings. Only one analyst currently recommends selling the shares. Price targets range from a Street high $290 to a low of $200, with the average consensus forecast pegged at $220. This implies a 3% premium to Wednesday’s $213.07 close.

Technical Outlook and Trading Tactics

PayPal shares trended sharply high between mid-March and early August but have remained rangebound since. Therefore, yesterday’s breakout on heavy volume to a fresh ATH may trigger further buying in subsequent trading sessions. Those who position for additional gains should consider using a fast period moving average, such as a 15-day SMA, as a trailing stop. To implement this exit strategy, remain in the trade until the share price closes below the indicator.

PayPal Holdings Could Offer Low-Risk Buying Opportunity

PayPal Holdings Inc. (PYPL) posted stronger-than-expected Q2 2020 earnings in July, booking a profit of $1.07 per-share on an impressive 22% revenue increase to $5.26 billion. The accelerated transition from paper to digital payment transactions underpinned the blowout results, completing a breakout above short-term resistance in the mid-180s. The uptick reversed above 204 last week, setting up a potential low-risk buying opportunity in coming sessions.

Paypal Opens Millions Of New Accounts

Total Payment Volume (TPV) increased 29% to $222 billion while PayPal opened more than 21 million new accounts, marking the strongest quarterly growth since the company came public in 2015.  The outlook for future quarters is equally bullish, with the COVID-19 pandemic signaling a paradigm shift into contactless payment systems.  The stock could post outsized gains well into 2022, given these historic tailwinds.

President and CEO Dan Schulman discussed the bullish metrics, stating” we have seen substantial macro changes that we believe will have a lasting and profoundly positive impact on our business. The world has accelerated from physical to digital across multiple industries including retail. Merchants are embracing a digital-first strategy, and these trends have fueled the rapid rise of digital payments. These are durable and meaningful tailwinds.”

Wall Street And Technical Outlook

Wall Street rates PayPal as a ‘Strong Buy’, based upon 28 ‘Buy’ and 5 ‘Hold’ recommendations. No analysts are recommending that shareholders sell their positions at this time. Price targets currently range from a low of $155 to a street-high $235 while the stock is now trading $15 below the median $209 target. The company carries a lofty 89.53 price-to-earnings ratio (P/E), lowering odds for further upgrades until Q3 performance trends become more transparent.

PayPal has posted a return in excess of 60% since breaking out above 2019 resistance near 120 in May, setting off overbought technical readings that have added fuel to the current downturn. The earnings news triggered a small breakaway gap between 184.75 and 190 while the stock is now trading near 194. Selling momentum could increase into this major support zone, signaling a ‘buy-the-dip’ trade that could book opportune profits.

PayPal Registers 52-Week High As Earnings Top Forecasts

PayPal Holdings, Inc. (PYPL) jumped 4.73% Wednesday after the San Jose digital payments company reported better-than-expected second-quarter (Q2) results amid surging e-commerce transactions during the pandemic. Adjusted earnings came in at $1.07 a share, up from 71 cents a year earlier and well ahead of the analysts forecast of 87 cents a share. Revenues also impressed, registering $5.26 billion in the quarter compared to Street expectations of $4.99 billion.

Chief Executive Officer Dan Schulman believes the company will continue to benefit from changing consumer preferences brought about by pandemic. “Simply put, our business has never been more relevant and important in the midst of the Covid pandemic. We have seen substantial macro changes that we believe will have a lasting and profoundly positive impact on our business,” he told investors during the earnings call, per Barron’s.

Through Wednesday’s close, PayPal stock has a market capitalization of $216.72 billion and trades 70% higher on the year. In the past three months alone, the shares have gained nearly 50% as of July 30, 2020.

Transaction and User Growth

Total Q2 transactional volume through the platform climbed to $222 billion, $12 billion above what analysts had expected and up from $172 billion in the year-ago quarter. The company added 1.7 million new merchant users during the quarter as businesses moved to accommodate a shift to contactless payments. Meanwhile, PayPal’s person-to-person payment service Venmo processed $37 billion in payments. Looking ahead, the company expects total payment volume to grow 30% in the third quarter.

Wall Street View

Analysts remain overwhelmingly bullish, despite the stock trading 71% above its five-year average projected earnings multiple. Currently, it receives 32 ‘Buy’ ratings, 4 ‘Overweight’ ratings, and 7 ‘Hold ratings. Just one analyst recommends selling PayPal shares. Wall Street has placed a 12-month price target on the stock at $186.36, indicating a 6% premium to Wednesday’s $184.60 close.

Technical Outlook & Trading Strategy

Since bottoming out in the low 80s at the height of the pandemic selloff, PayPal shares have remained in a steady uptrend. Gains accelerated after the stock gapped up by more than 14% in mid-May when the accompany announced it saw a record day of transactions earlier that month. Yesterday’s blowout earnings report added fuel to the fire, propelling the price to a new 52-week / all-time high on above-average volume.

Active traders who want to play the bullish momentum should consider using a 15-day simple moving average (SMA) to ride the trend as far as possible. To implement this strategy, stay in the position until the stock closes below the indicator. If the PayPal reverses at these levels, look for a possible decline to major support at $124, where price finds a confluence of support from the February swing high and 200-day SMA.

Buy PayPal; Target Price $210 in Base-Case and $240 Under Most Bullish Scenario

PayPal Holding Inc, a leading global payments platform, reported that its second-quarter profit surged 86%, the strongest quarterly performance in the company’s history, largely due to a solid rise in e-commerce transactions and new active accounts, sending its shares up about 5% in extended trading after hitting all-time high earlier in the day.

The digital payment service company said its second-quarter net income surged to $1.53 billion, or $1.29 per share, compared to $823 million, or 69 cents per share, the same period a year ago. Revenue jumped 25% to $5.26 billion.

PayPal anticipated the trends to continue and forecast earnings per share for 2020 to rise nearly 25% on more than 20% revenue growth.

“The COVID-19 induced shift to digital is providing significant tailwinds to PayPal’s business –with record 2Q results meaningfully exceeding expectations across the board. Importantly, we believe the increases in key business drivers are sustainable. We expect the stock to be strong on July 30,” said George Mihalos, equity analyst at Cowen.

PayPal said its added 21.3 million NNAs, bringing total active accounts to 346 million accounts, up 21%. The digital payment service company processed $222 billion in payments, up 29% on a spot basis and 30% foreign exchange. Merchant Services volume grew 28% and Venmo processed approximately $37 billion in TPV, growing 52%.

“We remain overweight on PayPal as secular e-com tailwinds, coupled with greater habituation opportunity in a post-COVID-19 environment, should allow the company to grow volumes above the rate of e-com (ex-Amazon). With greater profitability on the horizon, we see an opportunity for compounding 20%+ earnings growth,” said James Faucette, equity analyst at Morgan Stanley.

Executives’ comments

“In the midst of the COVID-19 pandemic, digital payments have become more important and essential than ever. Our record performance in the second quarter – our strongest quarter ever – reaffirms the relevance of PayPal in the unfolding digital future. We’re committed to supporting our consumers and merchants as they work to safely navigate this new reality,” said President and CEO Dan Schulman.

“Our second-quarter performance highlights the benefits of PayPal’s diversification and scale, and our resulting earnings power. We delivered 25% revenue growth on a currency-neutral basis, 49% growth in non-GAAP earnings per share, and generated $2.2 billion in free cash flow,” said CFO and EVP Global Customer Operations John Rainey.

PayPal stock forecast

Several equity research firms upgraded their PayPal’s stock outlook just after the result. RBC raised its target price to $212 from $192; Jefferies raised its target price to $230 from $210; Credit Suisse upped its price objective to $205 from $190; Piper Sandler raised its target price to $228 from $210. Canaccord Genuity raised it to $218 from $190. Morgan Stanley target price is $206 with a high of $239 under a bull scenario and $105 under the worst-case scenario.

We think it is good to buy at the current level and target at least $210 in the short-term and $240 in a best-case scenario as 100-day Moving Average signals a strong buying opportunity.

On the other hand, thirty-three analysts forecast the average price in 12 months at $184.14 with a high forecast of $215.00 and a low forecast of $132.00. The average price target represents a -0.25% decrease from the last price of $184.60. From those 33, 27 analysts rated ‘Buy’, six analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks.

Analysts’ comments

“PayPal, one of our top OWs, is the preferred digital wallet option for non-Amazon merchants, as evidenced by its online acceptance lead vs. other digital wallets and industry-low attrition. PayPal’s efforts to offer a seamless and secure checkout experience ties its TPV growth rate with the secular growth of eCommerce,” Morgan Stanley’s Faucette.

“As consumers increase their habitual use of PayPal, the company should grow its TPV at or above the rate of eCommerce (ex-Amazon). Venmo and partnership monetization should offer additional TPV and revenue growth, while operating leverage from its scale support 20%+ earnings growth over the medium term, despite near-term headwinds from eBay and macro impacts,” he added.

“Estimates move higher for ’20 and ’21; PT to $230. We raise our estimates to account for the momentum in the business and the updated outlook for 3Q/FY20. FY20 EPS goes to $3.68 (from $3.24) and our 2021 EPS moves to $4.34. PT increases to $230, reflecting better growth and wider margins; equal to 53x our ’21 estimate,” said John Hecht, equity analyst at Jefferies.

Upside and Downside Risks

Faster eCommerce (ex-Amazon) growth; Greater usage in existing markets and greater adoption in new markets; Faster margin expansion; Accretive acquisitions; Traction in Venmo monetization/new partnerships, Morgan Stanley highlighted as upside risks to PayPal.

A slowdown of eCommerce growth (ex-Amazon); Underperformance at eBay or faster conversion of volumes to eBay’s managed platform; Other market players with leads in offline could gain traction online, Morgan Stanley highlighted as downside risks.

PayPal Makes First Ever Blockchain Investment

PayPal was part of an extension to a series A funding round in Cambridge Blockchain, an identity and data management platform that keeps sensitive data secure and private for large institutions using shared ledger technology.

The specific amounts invested by PayPal were not disclosed by any part, but SEC filings indicate that Cambridge Blockchain raised a total of $3.5 million from several investors over the course of nine months. Note that PayPal invested as part of an extension stage to a series A round, whereas the main series A round raises $7 million. The total then would be $10.5 million.

Another notable investor in Cambridge Blockchain is HCM Capital, VC arm of Foxconn, the manufacturer for Apple’s iPhones.

A PayPal spokesperson emailed Coindesk about the investment saying:
“We made an investment in Cambridge Blockchain because it is applying blockchain for digital identity in a way that we believe could benefit financial services companies including PayPal. Our investment will allow us to explore potential collaborations to leverage blockchain technology.”

Unlike platforms such as BitPay, Square, or other point of sale services, Cambridge Blockchain does not compete with PayPal’s business efforts. Partially why this seemed to be an excellent first investment in the blockchain sphere for PayPal. PayPal can have a direct use for Cambridge Blockchain’s business efforts. They indeed hold sensitive user information, and the more secure options they have for handling user data, the better.

To get more detailed about Cambridge Blochain’s mission – it is to store, share, and validate data using blockchain technology. Their systems can run on public or private ledgers. They are working to improve the processes around user onboarding of personal data which included KYC processes, vetting of financial bank accounts, and other counterparties.

Some clients can be institutions who hold lots of sensitive personal information and companies with non-personal, but still sensitive data. They currently have 15 full-time employees and is part of the Decentralized Identity Foundation, a foundation effort which includes top companies such as the Enterprise Ethereum Alliance, IBM Blockchain, Hyperledgers, and others.

The industry is ultimately enthused to see PayPal make investments in the space. If they truly understand the power of blockchain, then it would only be wise for them to get involved. Until this point, cryptocurrency enthusiasts have been against PayPal and what they represent, but maybe their image can change now.

Speaking of PayPal, ex-cofounder Elon Musk recently made some waves on Twitter with crypto-related tweets. On April 2, 2019, he made his Twitter bio the CEO of Dogecoin, along with a string of tweets about how Dogecoin is the best cryptocurrency. You can still his tweets if you go to his feed. The real Dogecoin creator is Jackson Palmer, but we did not see any comment by him on the matter.