Why PayPal Holdings' Stock Has Risen 19% in 2018

What happened

Shares of PayPal Holdings, Inc. (NASDAQ: PYPL) have climbed more than 19% since the beginning of this year, according to data provided by S&P Global Market Intelligence, as the company has shown strong quarterly performance and several analysts have upgraded the company's stock and raised price targets.

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So what

PayPal's shares began to tick up at the beginning of the year as investors were anticipating solid results from the company's fourth quarter 2017. PayPal delivered on those positive sentiments with sales in the quarter rising 26% and earnings per share popping 57%, both on a year-over-year basis.

PayPal's shares continued to gain in April as the company reported its first-quarter results, with sales increasing 24% and earnings per share spiking 33%. Not only did PayPal's top and bottom lines jump significantly, but the company also proved that it can continue growing its user base at a rapid pace. The amount of total active customers increased by more than 8 million in the quarter, a 35% jump from the year-ago quarter, and brought the company's total active customers to 237 million.

The good news kept on coming in May when PayPal's management made a few predictions for the company at its annual investor meeting. Management said that over the next three to five years the company expects to grow its revenue by an average annual rate of 17% or 18%. Additionally, the company said it wants to return half of its free cash flow to shareholders.

That news spurred several analysts to increase PayPal's price target toward the end of May.


Oppenheimer's Glenn Greene increased PayPal's target from $85 to $90 and Cantor Fitzgerald bumped its target from $85 to $93.

Additionally, Scott Devitt at Stifel upgraded PayPal to a "buy" rating and set PayPal's price target at $99.

"We believe PayPal is well-positioned to benefit from eCommerce growth and the digitization of payments and is broadening its leadership position through its global scale and controlling the end-to-end experience," Devitt told investors.

Now what

PayPal's shares have continued to climb in July as investors anticipate the company's second-quarter earnings, which will be released on July 25. Management expects revenue to be in the range of $3.78 billion to $3.83 million, which would represent 22% growth from the year-ago quarter. Additionally, non-GAAP earnings per share are expected to be $0.55 at the midpoint, a jump of 19.5%. With the company already experiencing tremendous sales and customer growth, and moving ahead in new markets like peer-to-peer mobile payments, PayPal is clearly setting itself up to continue benefiting in the digital payments space.

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Chris Neiger 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.

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