PayPal (PYPL) is the largest digital platform that provides money transfer services. The fast-growing company remains one of the top stocks in today’s stock market. But is PayPal stock a buy in the current stock market rally?
PayPal Stock Fundamental Analysis: A Strong Track Record
PayPal boasts a consistent track record of earnings and sales growth, stretching back to at least 2010. In that year, it earned a mere 29 cents per share. In 2019, the company reported EPS of $2.96 per share. For 2020, the firm’s earnings grew 31% to $3.88 a share. Analysts expect the company’s EPS to grow 22% in 2021 and another 25% in 2022.
The evolution of digital payments is impacting the world and is a secular growth trend.
As a result of the company’s fundamental strength, PayPal’s EPS Rating is a highest-possible 99. The EPS Rating measures a company’s ability to grow profits year over year, using the most recent two quarters and the past three to five years of earnings growth.
The SMR Rating, meanwhile, highlights a company’s sales, profit margins and return on equity. Such metrics offer significant insight into a company’s fundamental strength. Driven by PayPal’s double-digit sales growth in recent quarters, 26% annual pretax margin and 23% annual ROE in 2019, the SMR Rating is an A.
PayPal Stock News: Bitcoin Trading
The company’s Q2 results are due out Wednesday after the close. Analysts expect the company’s earnings to grow 5% to $1.12 a share vs. the year-ago period. Revenues are expected to rise 19% to about $6.2 billion.
In the last quarter — reported on May 5 — PayPal reported March-quarter earnings, revenue and total payment volume that topped analyst estimates.
PayPal earnings jumped to $1.22 per adjusted share from a year earlier as e-commerce continued to boom amid the coronavirus pandemic. PayPal said revenue rose 29% to $6.03 billion, including the acquisition of Honey Science.
PayPal’s Venmo and the Square Cash App started off as person-to-person money-transfer services for family members and friends. Now they’ve evolved into broad consumer financial services apps fueling growth for these leaders in the burgeoning field of digital payments.
In late November, PayPal launched a cryptocurrency trading service, allowing clients to buy and sell Bitcoin.
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.
On April 20, PayPal just announced crypto on Venmo. The new feature allows customers to use these three types of cryptocurrency, plus Bitcoin Cash, to view crypto trends and make transactions. Crypto on Venmo started rolling out Tuesday, and will be available for all customers directly in the Venmo app within the next few weeks.
Is PYPL Stock A Buy Right Now?
In the recent stock market strength, PayPal is trading in the buy area above a 296.11 buy point in a cup with handle, according to IBD MarketSmith chart analysis, so the stock is a buy right now. The 5% buy zone goes up to 310.92. Keep in mind that buying a stock ahead of earnings increases risk. Shares can move sharply lower on disappointing earnings results or guidance.
PayPal is a long-time IBD Leaderboard member. According to Leaderboard commentary, “PayPal is near the top of the 5% buy zone after a low-volume breakout from a cup-with-handle base.“
PayPal stock dropped 1% Tuesday.
For more leading stocks and stocks approaching buy points, check out these IBD Stock Lists, like the Stocks Near Buy Zones. To see the current stock market trend, check out IBD’s signature daily analysis, The Big Picture.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
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