PayPal’s latest moves should bring significant customer base growth to the company, which in turn will drive PayPal’s earnings and stock growth in the near term.
PayPal (PYPL) stock has seen strong consistent growth in 2020, and the company’s revenue and earnings growth over the past two quarters has mirrored the trend as the COVID-19 pandemic has accelerated the transition of individuals and businesses from traditional banking services to more technological online applications. Apps like Venmo PayPal and Cash App Square have largely replaced bank transfers.
PayPal shares are up over 113% in 2020, with little price pullbacks. The market capitalization of PayPal at the close of trading on Tuesday was more than $ 272 billion, which is more than the capitalization of many of the largest US banks: Bank of America (BAC), Wells Fargo (WFC) and Citi (C). At the moment, the financial and technological company is still significantly ahead of JPMorgan Chase (JPM) with a market value of almost $ 378 billion. However, 2020 was named by many experts as one of the worst in history for American banks.
PayPal’s earnings per share and earnings have surpassed analysts’ estimates over the past two quarters, showing a strong growth spurt. PayPal quarterly earnings and earnings statistics for the last 2 years are available here.
The recent steps of PayPal to introduce the service of buying and selling cryptocurrencies (Bitcoin, Ethereum and others), as well as the abolition of the traditional fee for cashing out government payments, pushed the company to even greater growth.
In November, about 350 million people used PayPal, more than any other US financial institution.
Cancellation of PayPal commissions for cashing out state COVID-19 relief payments
To dominate the fast-paced electronic payments market and stay ahead of its competitors, PayPal has taken steps to demonstrate its responsiveness to its customers.
For example, PayPal has decided to waive cash-by-check check cashing fees for recipients of COVID-19 government assistance payments.
On April 10, 2020, PayPal received the status of the first “Internet bank” authorized by the US government to transfer state. funds to the accounts of Americans.
While Americans need to visit a branch and pay a commission to receive these payments at banks, PayPal customers take pictures of their checks and can access them within minutes.
“During the first wave of government incentive payments in April and May, we saw an incredible number of customers turn to PayPal as a way to quickly and securely receive incentive payments, either through direct deposit or PayPal cash,” said John Kunze, Sr. VP of Brands, PayPal. “With the next round of retail payouts approaching, customers who receive a paper incentive check in the coming weeks will be able to cash their check without having to go to the physical check cashing location by simply taking a photo of the check through the app for quick and easy receiving funds “.
Following the approval of the Cares 2 Act by Congress and signing by President Donald Trump on December 27, weekly payments of $ 600 began to flow to Americans.
With the pandemic and consumer preferences for online and contactless transactions, PayPal, with its refusal to commission, has every chance to win an even larger audience and inspire investor optimism, which should be followed by a rise in stocks.
Bitcoin growth and the ability to invest in them on PayPal from $ 1
In early December, PayPal expanded its Cryptocurrency app to buy, store, and sell cryptocurrencies for all registered users in the US.
With no commissions for transactions and cryptocurrency storage in PayPal accounts, the company has attracted many interested Americans in the fast-growing cryptocurrencies. In addition, given the high price of Bitcoin, PayPal made it possible to invest in their purchase from $ 1.
The price of Bitcoin has quadrupled over the past year, surpassing the $ 30K mark this weekend and hitting $ 34,394.4 on Tuesday.
Analysts are talking about a synergistic effect: the rise in the price of Bitcoin should help increase the share of PayPal, and the price of Bitcoin, in turn, is growing due to the fact that its owners can make purchases with PayPal on more than 26 million online sites around the world. This will undoubtedly increase the adoption and use of Bitcoin in the coming months.
PayPal’s competitors are also playing a role in the rise in cryptocurrency prices. Square recently announced that it will allow customers to receive Bitcoin back on transactions for the first time, forcing the payment platform to buy more Bitcoin. In December, insurance giant MassMutual announced a $ 100 million investment in Bitcoin for its general investment account.
InvestorPlace’s David Moadel wrote: “People like Bitcoin when the price rises, not when it falls. Crowds usually rally around what’s popular and I expect the growing popularity of cryptocurrencies to help PayPal, and vice versa. ”