PayPal Stock To Leverage Huge User Base As eBay Fades Away And Rivalries Grow

IBD Stock Analysis

  • Stock moving up right side of consolidation with buy point of 309.24
  • Within a larger consolidation, shares offer an early entry at 277.96
  • PayPal on IBD Leaderboard; holds Relative Strength Rating of 80

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Emerging Pattern


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PayPal Holdings (PYPL) is the IBD Stock of the Day as the e-commerce firm surpasses an early entry point. PayPal stock has gained some 11% since it reported first-quarter earnings, though analysts say its disengagement from former parent eBay (EBAY) still bears watching.


Amid the growth in online shopping spurred by the global Covid-19 emergency, PayPal stock popped 117% in 2020. It has advanced about 18% in 2021 amid questions over whether total payment volume growth will slow as the coronavirus emergency ebbs.

The entry point for PayPal stock is 309.24. That’s a bit more than its all-time high set on Feb. 16 this year. The financial technology, or fintech stock, trades about 11% below that buy point.

Within a larger consolidation, PYPL stock also offered an early entry of 277.96 tied to a new base that formed after its April 14 high. Shares were up 1.9% to close at 283.38 in afternoon action on the stock market today.

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One bullish sign is that PayPal stock retook its 50-day moving average during a base-forming period.

PayPal Stock: EBay Phase-Out Still A Worry

If investors subscribe to IBD Live, they can get a detailed analysis of PYPL stock from today’s archived video.

PayPal stock holds a Relative Strength Rating of 80 out of a best-possible 99, according to IBD MarketSmith analysis.

In addition, the stock belongs to the IBD Leaderboard. The Leaderboard is IBD’s curated list of leading stocks that stand out on technical and fundamental metrics.

March-quarter earnings for San Jose, Calif.-based PayPal doubled to $1.22 per adjusted share. Revenue rose 29% to $6.03 billion, including the acquisition of Honey Science. Analysts expected PayPal earnings of $1.01 a share on revenue of $5.91 billion.

PayPal topped analyst estimates even though total payment volume from eBay fell at a faster rate. EBay, which spun off PayPal in 2015, is shifting its payment processing from PayPal to Netherlands-based Adyen.

PYPL Stock: Large User Base Key Asset

Meanwhile, PayPal has evolved from online checkout to mobile shopping and person-to-person payments.

To offset the loss of eBay transactions, PayPal aims to grow revenue from Venmo, its money-transfer service for family and friends.

In addition, PayPal expects to grow revenue from new partnerships in China and Latin America. In 2020, PayPal acquired a 70% stake in China’s GoPay. PayPal also holds a stake in Latin American e-commerce firm MercadoLibre (MELI).

PayPal had 392 million active accounts worldwide as of March 31. By 2025, PayPal stock aims to reach 750 million worldwide active users.

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“Perhaps PayPal’s key strategic asset at this point is its 392-plus million net active users globally, which grew at 21% in Q1,” Canaccord Genuity analyst Joseph Vafi said in a note to clients. “This kind of overall growth in customer count, combined with increased engagement per user is driving TPV growth of 50% — most all of which is still in PYPL’s e-commerce power-alley.”

Growing Rivalries With Square, Stripe

Vafi added that “PayPal does not need to invent new growth opportunities. If others gain traction PayPal can be a ‘very early follower’ while bringing a user base that reaches far and wide and probably already overlaps emerging competition.”

Meanwhile, PayPal’s rivalry with Square (SQ) has been growing as both build up consumer-facing services in mobile apps.

PayPal told analysts that it expects new consumer app features — such as cryptocurrency purchases, personalized shopping perks and “buy now, pay later” — to increase average user revenue. PayPal’s competition is also coming from Stripe and other well-funded fintech startups.

PayPal also reportedly told merchants on Friday that it plans to hike transaction fees for some products, such as Venmo payments, in August.

If you’re new to IBD, consider taking a look at its stock trading system and CAN SLIM basics. Recognizing chart patterns is one key to the investment guidelines.

Investors also can create watch lists, find companies nearing a buy point, or develop custom screens at IBD MarketSmith.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

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