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Here’s Why PayPal Stock Is Rising on Friday

By Matthew Frankel, CFP® - Mar 13, 2020 at 11:24AM

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The payment processing giant is rebounding nicely after a rough week.

What happened

A day after the worst stock market decline since 1987, the major indexes are rebounding nicely, with the vast majority of stocks in the green. As of 10:50 a.m. EDT on Friday, the Dow Jones Industrial Average, S&P 500, and Nasdaq were all higher by more than 3%, mainly fueled by hopes of a government stimulus to combat the COVID-19 coronavirus' effects on the economy.

One fintech stock that's having a particularly strong day is payment processing giant PayPal (PYPL 2.23%), which is up by about 6%, roughly doubling the gains of the broader market.

Woman shopping online.

Image source: Getty Images.

So what

Financial stocks, such as banks, insurance companies, and fintechs, have been some of the hardest hit by the recent downturn. Plunging interest rates make it harder for banks to earn a profit on loans and for insurers to profit from investments, and fears of a slowdown in consumer spending are also bad for all companies depending on payment activity.

Obviously, this includes PayPal. The company relies on payment volume to generate revenue, and lower consumer spending would obviously hurt. But economic stimulus is designed to inject more money (and spending) into the economy, so PayPal's problem could end up not being as bad as initially thought.

Now what

Having said all that, we don't know (at the time of this writing) exactly what measures the government plans to take, and there's still no way of knowing how long or deep the economic downturn will end up being. A stimulus would certainly be a positive catalyst for PayPal, but the company is by no means out of the woods yet.

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PayPal Holdings, Inc. Stock Quote
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