PayPal Stock Forecast: Everything You Need to Know Before Investing
If you have ever bought or sold something online then there’s a good chance that you’ve used PayPal (Nasdaq: PYPL). Even if you are the type of person that still only purchases things in a store in person, you’ve probably seen PayPal as an option for payment. This incredibly popular payment processing company operates in the majority of countries that support online money transfers. On top of that, its stock has also been a solid investment. And this PayPal stock forecast will tell investors what they need to know about its future potential as an investment opportunity.
PayPal has a suite of tools that make it easy for consumers to pay for products. It also creates tools that make it easy for merchants to collect payments. No matter which side of the transaction you are on, PayPal is there to help… While also collecting a small percentage.
In fact, PayPal has been helping people buy and sell things online since 1998. For a few years, they were owned by eBay (Nasdaq: EBAY). The company was essentially synonymous with eBay’s platform. However, PayPal was spun off from eBay to become its own company again in 2015.
With all this talk of buying and selling, you are probably wondering if you should buy PayPal stock and add it to your portfolio. Or, if you’ve owned the stock for a while, then maybe it’s time to sell PYPL stock and look for other opportunities.
To answer this question, let’s take a look at a PayPal stock forecast.
NOTE: I am not a financial advisor and am just offering my own research and commentary. Please do your own due diligence before making any investment decisions. I also own a small position in PayPal.
Details Behind This PayPal (Nasdaq: Pypl) Stock Forecast
E-commerce had already been growing at an incredible rate over the past two decades. However, when COVID-19 hit, the e-commerce boom was further accelerated. Now, global e-commerce sales are expected to top $4 trillion. And PayPal has played a prominent role in this growth and in helping online commerce flow smoothly.
As of Q2 2021, PayPal has more than 400 million customers (consumers/merchants) in 200+ markets. Its number of total accounts has more than doubled since 2015. It also reported $311 billion in total payment volume.
From a consumer perspective, PayPal also owns Venmo, a popular app for sending money to friends. Venmo recently teamed up with rapper Jack Harlow to promote the app.
It feels as though PayPal has been around since the dawn of e-commerce. However, this has not stopped it from constantly innovating and adding new products to its arsenal. Here are just a few new updates that investors can get excited about:
- Buy Now, Pay Later: Buy Now, Pay Later (BNPY) services like Affirm (Nasdaq: AFRM), Klarna, and Afterpay make it easy for consumers to buy products. They essentially offer point-of-sale loans to help consumers finance everyday products. BNPL services are incredibly popular. And they’ve created some of the world’s most valuable fintech startups. Now, PayPal has announced that it’s getting into the BNPL game.
- Cryptocurrency: PayPal recently launched a cryptocurrency platform. This platform lets users buy and sell Bitcoin, Bitcoin Cash, Ethereum, and other cryptocurrencies. It also allows users to pay for items with crypto.
- Invest at PayPal – It’s currently rumored that PayPal is planning on launching an investing platform. This rumor is based on the fact that Rich Hagen – a former president at Ally Invest – changed his LinkedIn profile. This platform is rumored to let PayPal users buy and sell individual securities.
With these announcements in mind, let’s take a look at how PayPal’s stock has moved recently…
Reflecting on the PYPL Stock Price Movement
Since being spun off from eBay in 2015, PayPal has had an impressive run. In the past six years, PayPal’s revenue has been rising consistently… To the tune of around 18% per year. Not to be outdone, its net income has risen by an average of about 29% annually during the same time. Additionally, the rush of people buying products online during the pandemic was a boon for PayPal’s business. This resulted in a 70% YoY increase in PayPal’s bottom line during 2020.
PayPal’s stock has increased 17% so far in 2021 and is up 515% over the past 5 years. Notably, PayPal’s stock surged 120% in 2020. This are all important factors to weigh when considering the PayPal stock forecast. But with all of that said, let’s take a look at the most important question: Should you buy PayPal stock?
PayPal Stock: Potential Upsides
To me, the most underrated part of PayPal’s business is the size of its consumer base. As of Q2 2021, it had more than 400 million customers. PayPal feels as if it’s reaching a point where it’s easier to just work with PayPal than sticking out by trying to use a competitor. The reason that it’s easier to use PayPal is simply because everyone else is using PayPal.
In this sense, it’s a little bit like how many people only use Facebook because everyone else is using it. Or why some only get an iPhone so they can use iMessage with their friends (who all have iPhones).
The size of PayPal’s user base is also a huge untapped source of data for the company. Let’s say that PayPal takes a leaf out of Facebook’s…umm… book and starts harvesting data from its customer base. It wouldn’t need to speculate what people might be buying based on their interests. Instead, it would literally know what people are buying. That’s simply because PayPal helped them buy it. This type of information could be incredibly valuable for PayPal and its merchants.
PayPal also had top-of-mind brand awareness when it comes to digital payments. However, PayPal has not gotten complacent at all. In fact, it’s launching more new projects now than ever before. In particular, its cryptocurrency platform and (potential) stock trading platform are extremely exciting. And they could prove to be very lucrative.
PayPal competitor Square (NYSE: SQ) introduced cryptocurrency investing in 2018. Just three years later, cryptocurrency investing brought in $2 billion in annual revenue for Square. CEO Dan Schulman has already declared that cryptocurrencies will be a big growth engine for PayPal moving forward.
On top of all this, PayPal’s customer base is significantly larger than most other fintech companies. This means that it can instantly be a contender when it launches products like crypto investing, stock investing, or BNPL services.
Of course, no stock is ever a guarantee though. And no PayPal stock forecast would be complete without some warnings. So let’s take a look at a few potential downsides of investing in PayPal.
PayPal Stock: Potential Downsides
There was a huge surge of digital payments during the 2020 pandemic. This created an incredible boost for all companies associated with e-commerce. However, the pandemic is largely over in most parts of the U.S. Since people spent so many months quarantined indoors, it’s worth speculating that the reverse of 2020 could happen going forward.
Instead of spending hours online, people might rush outdoors to make up for lost time. This type of behavior could negatively impact PayPal’s stock in the short term.
Additionally, cryptocurrency is becoming more mainstream. So you have to wonder if it could eventually replace many financial providers. The point of cryptocurrency is not just for it to be an asset. It’s to eliminate financial intermediaries from transactions. Bitcoin could make it incredibly easy to buy products online from anywhere in the world. If this became the norm then there would be no reason to pay PayPal a 2.9% fee.
To explain this type of scenario, just imagine the steady (but quick) transition from video rentals to streaming. Streaming was just so much cheaper and more convenient than video rentals. That made it so there was no reason to visit a Blockbuster video. In a matter of years, Blockbuster went from a massive company to bankrupt. If cryptocurrencies gain popularity, the same type of event could potentially happen to payment processors like PayPal.
It’s safe to say that a transition of this size is fairly far off. However, if it were to happen then it could be catastrophic for PayPal’s business. And this is despite the fact that it has entered the world of crypto.
I hope that you’ve found this PayPal stock forecast to be valuable. As usual, all investment decisions should be based on your own due diligence and risk tolerance.
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About Teddy Stavetski
A University of Miami grad, Teddy studied marketing and finance while also playing four years on the football team. He’s always had a passion for business and used his experience from a few personal projects to become one of the top-rated business writers on Fiverr.com. When he’s not hammering words onto paper, you can find him hammering notes on the piano or traveling to some place random.