Investors who have owned stocks in the last year have generally experienced some big gains. In fact, the SPDR S&P 500 ETF Trust (NYSE:SPY) total return over the last 12 months is 31.2%. But there is no question some big-name stocks performed better than others along the way.
PayPal’s Big Run: One company that has been a solid investment in the last year has been digital payments giant Paypal Holdings Inc (NASDAQ:PYPL).
Unlike many other companies, the COVID-19 pandemic in 2020 didn’t hurt PayPal’s business. In 2019, PayPal reported $2.07 in adjusted EPS on $17.7 billion in revenue. In 2020, EPS jumped to $3.54 and revenue grew to $21.4 billion.
In fact, economic shutdowns around the world facilitated a broad shift from cash toward digital payments, creating a tailwind for PayPal and other online and mobile payment apps. The more than $6 trillion in U.S. government stimulus measures also triggered concerns over rising inflation levels.
As a result, cryptocurrency prices soared, which was great news for PayPal’s Bitcoin (CRYPTO: BTC) business. Bank of America has estimated PayPal will generate $123 million in revenue from cryptocurrency trading in 2021. PayPal is also reportedly exploring a stock trading service to take advantage of the recent boom in retail trading.
At the beginning of 2020, PayPal shares were trading at $110.75. By the beginning of March, the stock was up to $112.86 despite news of the coronavirus spreading in China prompting concerns about a U.S. pandemic.
PayPal bottomed at $82.07 during the pandemic-driven March sell-off. Fortunately for PayPal investors, the dip did not last long.
By early May, PayPal shares were back at new all-time highs above $140, but PayPal wasn’t done there. By August, PayPal had made it above $200 for the first time.
PayPal In 2021, Beyond: PayPal ultimately made it to a new all-time high of $309.14 in February 2021 before pulling back to as low as $227.52 in March. The stock hit a new high of $310.16 in July before a disappointing second-quarter earnings report sent the stock back down to around $287 today.
A continuing rally in cryptocurrency prices or a major push into stock trading could send PayPal to new all-time highs in the coming months. In addition, the transition of eBay Inc (NASDAQ:EBAY) will remove a major headwind for PayPal revenue growth in the coming quarters. PayPal is also planning to launch a new digital wallet “super app,” which will feature bill pay, direct deposit and high-yield savings services.
At the same time, potential rotation out of growth stocks and into value stocks could weigh on PayPal’s performance. The stock currently trades at 13.9 times sales and 48.8 times forward earnings, suggesting some very high expectations are already priced in.
Still, PayPal investors who bought one year ago and held on have generated a nice return on their investment. In fact, $1,000 in PayPal stock bought on Sept. 1, 2020, would be worth about $1,414 today.
Looking ahead, analysts are expecting more upside for PayPal in the next 12 months. The average price target among the 40 analysts covering the stock is $330, suggesting a 14.7% upside from current levels.