PayPal (PYPL) is the largest digital platform that provides money transfer services. The fast-growing company remains one of the top stocks in today's stock market. But is PayPal stock a buy in the current stock market rally?
PayPal Stock Fundamental Analysis: A Strong Track Record
PayPal boasts a consistent track record of earnings and sales growth, stretching back to at least 2010. In that year, it earned a mere 29 cents per share. In 2019, the company reported EPS of $2.96 per share. For 2020, the firm's earnings grew 31% to $3.88 a share. Analysts expect the company's EPS to grow 21% in 2021 and another 25% in 2022.
The company's Q2 results came out Wednesday after the close. The company earned an adjusted $1.15 a share on sales of $6.24 billion. Sales missed estimates. Analysts expected the company's earnings to grow 5% to $1.12 a share vs. the year-ago period. Revenues were expected to rise 19% to about $6.27 billion.
The evolution of digital payments is impacting the world and is a secular growth trend.
As a result of the company's fundamental strength, PayPal's EPS Rating is a highest-possible 99. The EPS Rating measures a company's ability to grow profits year over year, using the most recent two quarters and the past three to five years of earnings growth.
The SMR Rating, meanwhile, highlights a company's sales, profit margins and return on equity. Such metrics offer significant insight into a company's fundamental strength. Driven by PayPal's double-digit sales growth in recent quarters, 26% annual pretax margin and 25% annual ROE in 2020, the SMR Rating is an A.
PayPal Stock News: Bitcoin Trading
PayPal's Venmo and the Square Cash App started off as person-to-person money-transfer services for family members and friends. Now they've evolved into broad consumer financial services apps fueling growth for these leaders in the burgeoning field of digital payments.
In late November, PayPal launched a cryptocurrency trading service, allowing clients to buy and sell Bitcoin.
In addition, PayPal customers will also be able to use cryptocurrencies to shop at the 28 million merchants on its network starting in early 2021, the company said.
On April 20, PayPal announced crypto on Venmo. The new feature allows customers to use these three types of cryptocurrency, plus Bitcoin Cash, to view crypto trends and make transactions. Crypto on Venmo started rolling out Tuesday, and will be available for all customers directly in the Venmo app within the next few weeks.
Is PYPL Stock A Buy Right Now?
PayPal triggered the 7%-8% loss rule from its 296.11 buy point in a cup with handle amid recent sharp losses, according to IBD MarketSmith chart analysis, so the stock is not a buy right now.
PayPal is a long-time IBD Leaderboard member. According to Leaderboard commentary, "PayPal fell more than 8% below its latest buy point, which results in a sell signal. Shares are below the 50-day line, another bad sign."
PayPal stock dropped over 1.5% Tuesday.
For more leading stocks and approaching buy points, check out these IBD Stock Lists, like the Stocks Near Buy Zones. To see the current stock market trend, check out IBD's signature daily analysis, The Big Picture.
Be sure to follow Scott Lehtonen on Twitter at @IBD_SLehtonen for more on growth stocks and the stock market.
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