PayPal shares have risen for nine consecutive trading sessions. Will the rally continue after the report?

Shares of PayPal, one of the largest fintech companies in the world, have been rising for nine consecutive trading sessions: this is the longest such series in four years. Investors are buying up securities in anticipation of the service's second-quarter earnings report, which is expected on July 29. Financial indicators of the company will help to clarify the further trajectory of securities movement, analysts say.

Over the past nine trading sessions, PayPal shares have risen by 7% and showed the longest streak of growth since April 2021, when quotes rose by a similar amount in ten sessions. This was reported by MarketWatch. However, since July 2021, when the stock reached its historic peak, the value of PayPal's securities has fallen by about 75%, and since the beginning of this year - by more than 8%.

Such dynamics forms the status of a volatile stock around the company, causing diametrically opposite sentiments among investors in the run-up to the reporting: some are afraid of increased competition in the online payments segment, while others count on improved execution of strategic goals under the leadership of the current management;

- Bernstein analyst Harshita Rawat predicts that upcoming reporting will be positive, MarketWatch reports. First, continued strong and stable trends in online commerce could provide sustained growth in transactional activity. Second, a weaker U.S. dollar theoretically contributes to growth in the company's cross-border operations, although a significant portion of currency risk is neutralized by PayPal's existing fairly elaborate hedging program, the analyst said. According to Rawat, the company is increasing the speed of bringing new products to market and stimulating interest in its own debit cards.

But Bernstein gave the stock only a neutral rating, noting skepticism about the company's short-term prospects. From Rawat's point of view, investors have an equally likely dilemma: either PayPal stock will become a high-growth stock with multiple returns over three years, or it will turn into a "structural short." The main problem is that there isn't enough data at this point to lean confidently toward one of these scenarios. It is this uncertain combination of strong fundamental drivers and risks that creates a tense, but at the same time attractive situation around PayPal for trading participants, says analyst Bernstein.

- Jefferies analyst Trevor Williams expects PayPal to beat forecasts for gross transaction revenue and margins in absolute terms, but the key figure investors will be looking at is Branded TPV (transaction volume through branded payment). Williams believes that the growth rate of this indicator slowed down in the second quarter due to trade restrictions imposed on Chinese platforms, including Temu and Shein. The analyst forecasts Branded TPV growth of 5%, up from 6% in the first quarter, and believes a significant acceleration before the end of the year is unlikely. Against this backdrop, he also maintains a neutral rating for PayPal's shares and expects that the lack of drivers for a marked improvement in payment volume dynamics will limit the stock's upside potential.

- According to Morgan Stanley, PayPal will continue to see healthy growth in the second quarter, driven by efforts in smart transactions and the development of offline solutions. Current initiatives to deepen partner integrations and pricing programs should drive revenue acceleration, with transaction volume growth expected to be in the range of 5-6%, up from 4% in the previous quarter, and Braintree payment acceptance platform volumes expected to exceed 2%. According to Morgan Stanley, this confirms the company's ability to effectively diversify its revenue sources.

Morgan Stanley analysts maintain a neutral recommendation, noting that the current business base and share buybacks support valuation stability, but key growth drivers have yet to fully manifest themselves. To move to a more optimistic outlook, we need to see an acceleration in the adoption of proprietary smart transactions above 45% and stronger customer growth in Venmo's rapid transfer service.

The fintech service on July 28 announced an expansion of the capabilities of its payment platform for businesses: it announced the launch of a feature that will allow merchants to accept payments in the form of cryptocurrencies. The platform will support transactions involving more than 100 cryptocurrencies and crypto wallets, including Coinbase and MetaMask, the company said.

"There are 650 million users worldwide who participate in the $3 trillion cryptocurrency market, and we wanted to give small businesses access to [this] growing customer base," Frank Keller, PayPal's general manager of the platform for large businesses and merchants, told Bloomberg. According to him, PayPal wants thereby to demonstrate its long-term focus on the crypto market.

This article was AI-translated and verified by a human editor