Why PayPal Holdings Stock Gained 14% in 2018

What happened

It was a busy year for PayPal Holdings (NASDAQ: PYPL) . The company continued to report robust operating results, made a few acquisitions, and continued to form partnerships to expand its brand ubiquity around the world.

The stock jumped around toward the end of the year amid the turbulence in the broader market, but steady growth in revenue and earnings powered a 14.2% increase in the shares last year, according to data provided by S&P Global Market Intelligence .

SPY Chart

SPY data by YCharts .

So what

Through the first three quarters of 2018, PayPal grew revenue 20% year over year to $11.2 billion compared to $9.35 billion in 2017. The growth in operating income was even stronger, at 24.3% year over year. Those results were fueled by increases in total payment volume, new customer accounts, and customer engagement.

A finger touching the screen of a smartphone with the image of shopping cart displayed on the screen.


The results reflect the efforts management has made over the last few years to form partnerships with banks , credit-card companies, and other digital wallet providers to provide customers with more payment choices at checkout. PayPal has now gained a position of being a go-to partner for retailers, as well. For example, Walmart  recently reached a deal with PayPal to make the payment provider’s services accessible in all of the retailer’s stores domestically.

Now what

It appears that nothing will stop PayPal at this point. The company is staying on offense, as evidenced by the acquisitions management made last year  that could expand PayPal’s addressable market. The most notable one was the purchase of iZettle for $2.2 billion. iZettle is essentially the Square  of 11 international markets, including Latin America, which represents a tremendous growth opportunity for PayPal.

Analysts expect PayPal to grow earnings about 20% per year over the next five years, which is consistent with the company’s recent growth. The shares are not cheap, at a forward earnings multiple of 30 times next year’s earnings estimates. Given the opportunities ahead and PayPal’s current momentum, I wouldn’t be shy to be a buyer at these prices.

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John Ballard owns shares of PayPal Holdings. The Motley Fool owns shares of and recommends PayPal Holdings and Square. The Motley Fool has the following options: short January 2019 $82 calls on PayPal Holdings and short January 2019 $80 calls on Square. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Referenced Symbols: PYPL

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