Expand / Collapse search
Watch TV
Menu

Quotes displayed in real-time or delayed by at least 15 minutes. Market data provided by Factset. Powered and implemented by FactSet Digital Solutions.  Legal Statement.

This material may not be published, broadcast, rewritten, or redistributed. ©2024 FOX News Network, LLC. All rights reserved. FAQ - New Privacy Policy

Markets
Published

Why PayPal Holdings Inc. Stock Gained 16% in January

What happened

Shares of PayPal Holdings Inc. (NASDAQ: PYPL) rose 15.9% last month, according to data from S&P Global Market Intelligence.

So what

PayPal stock rose during the month of January as investors eagerly anticipated its fourth-quarter 2017 earnings report, which was released after the markets closed on Jan. 31. PayPal had previously rewarded shareholders with a string of impressive earnings results, typically highlighted by double-digit expansion in total payment volume (TPV), a key growth metric which measures the total dollar volume transacted over PayPal's platform in a given quarter. As a result, PayPal's stock had already soared 87% in 2017.

The fourth-quarter earnings report might well have pushed PayPal's stock higher, but for the news that former parent eBay (NASDAQ: EBAY) has decided to jettison PayPal as the merchant of record on its account after the current agreement between the two companies expires in mid-2020.

While its contribution to PayPal's business is gradually being reduced, eBay still accounts for roughly 13% of PayPal's overall TPV. During the company's earnings conference call, management attempted to assuage shareholders' concerns by pointing out that PayPal will remain as a checkout option on eBay's site through at least 2023. Executives also asserted that PayPal's torrid growth can more than make up for lost eBay revenue over the next five years.

Nonetheless, investors were rattled by the announcement, and also appeared to have some misgivings over eBay's decision to use a competing payments platform offered by privately held European transactions specialist Adyen once the current agreement expires. PayPal quickly began giving back its January gains in the very next trading session on Feb. 1, though the stock has recovered slightly to date:

Now what

The fundamentals behind PayPal's business really haven't changed. The organization's revenue advanced by nearly 26% last quarter, and earnings per share jumped by 56%. Growth opportunities abound, most notably within PayPal's virally popular social payments app Venmo, which is starting to be monetized. February's swoon may reflect some convenient profit-taking by near-term investors.

For those who are holding PayPal for the long term, I described the impending eBay separation and its ramifications in a recent earnings recap. These are still quite solid shares to hold in a growth portfolio.

10 stocks we like better than PayPal HoldingsWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and PayPal Holdings wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of February 5, 2018

Asit Sharma has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool has a disclosure policy.