If there was one thing we learned from 2020, it's the sheer necessity of a robust online shopping platform. Being able to sell to customers who can't—or won't—walk into a physical store is crucial to ongoing business, especially when disasters strike and governments respond. PayPal (NASDAQ:PYPL) proved to be a leader in the online shopping market by facilitating the payments process, without which no online shopping can truly be. PayPal's presence in the market was already looking good, and it's only recently improved thanks to some new analyst love.
A Big Upgrade
The latest dose of analyst love for PayPal comes from BTIG, whose analyst, Mark Palmer, upgraded the stock from “neutral” to “buy”. While certainly, the value of PayPal as a digital shopping tool was clear, Palmer's upgrade had little to do with shopping and more to do with investing. Palmer put his upgrade on PayPal thanks to PayPal's increasing connection to cryptocurrency.
Palmer suggested that increases seen recently with Paxos' itBit exchange are fairly closely connected to trades executed for PayPal users. The recent connection between PayPal and cryptocurrency could, Palmer notes, mean as much as an extra $1 billion annually to PayPal revenues by as early as next year. Better yet, Palmer noted, the rises on itBit suggest that PayPal traders aren't just present, but they're actively trading, which means better account growth and group engagement.
Just to round out the package, Palmer slapped a price target of $300 per share on PayPal, which suggested substantial upside potential, around 23% worth at last report.
Not Exactly a Leap of Faith
Anyone thinking Palmer is a maverick here should probably reconsider. It turns out that, based on our latest research, PayPal is already pretty beloved by the analyst community, a love that's been strengthening over the last six months. The company has enjoyed a consensus “buy” rating for all that time, and the ratios have steadily improved.
Six months ago, the company had six “hold” ratings, 31 “buy” and one “strong buy.” Three months ago, there was a small shift as the company had five “hold”, 35 “buy” and one “strong buy.” It lost one “buy” rating a month ago, and today, it also lost one “hold”, which improves the picture to four “hold”, 34 “buy” and one “strong buy.”
The price target has been steadily improving, but not as fast as the share price itself. Six months ago, PayPal had a target of $167. That went up to $197.85 three months ago, and $207.56 a month ago, before hitting $217.97. Given that PayPal's current share price is around $244.26, though, it's clear that price targets may need some adjustment. Indeed, that adjustment has happened on some fronts; just a week ago, Moffett Nathanson hiked its target to $300, and Mizuho boosted it to $350.
A Multifaceted Opportunity
PayPal really does have some incredible potential going into the near-term, and for several reasons. We've already seen how PayPal can dominate a market; it was the biggest thing on eBay for a while, and even when eBay (NASDAQ:EBAY) announced plans to shift to Adyen (OTCMKTS:ADYEY), PayPal users were pretty quick to vocalize their concern that PayPal wouldn't be an option. Even noted songwriter “Weird Al” Yankovic referenced PayPal in his song about eBay. Beyond that, though, PayPal acceptance was starting to show up in the real world as well; some gas stations were even accepting it as payment at the pump. PayPal even made the gig economy hum; how many web-based properties currently are using PayPal to pay everybody from designers to writers and beyond?
A connection to cryptocurrency, meanwhile, will only pour gas on the fire that is PayPal's share price. With crypto issues gaining substantially over the last couple months—suddenly everybody that bought in on bitcoin back when it was $19,000 each is vindicated beyond anything anyone expected—making it easier to put investment into cryptocurrency is likely to pull in everybody who ever thought they could penny-stock their way to a fortune. Given the increasing institutional interest in bitcoin, and the likely halo effect that should have on cryptocurrencies from Ethereum to Litecoin and beyond, that could mean big things for PayPal as it works to meet this new consumer interest.
Essentially, PayPal has just hung out its shingle as a shovel-seller in the midst of a new gold rush. That in turn will likely mean good things for PayPal investors as people both spend and earn money through the service. With PayPal taking a little slice of every transaction that goes through, a huge slug of revenue should ultimately hit the company's coffers.
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