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.