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Why PayPal's Shares Rose 29% in April

By Royston Yang – Updated May 6, 2020 at 8:39AM

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The online payments company is doing its part to support small businesses during this crisis.

What happened

Shares of PayPal (PYPL 1.29%) rose 29% in April, according to data provided by S&P Global Market Intelligence.

This surge brings the shares 11% above the level they traded at the start of the year, and almost 44% higher than the low they experienced in late March. PayPal remains one of the stronger financial stocks to own during the coronavirus crisis.

A woman holding a credit card while making an online purchase.

Image source: Getty Images.

So what

At the end of March, PayPal announced a set of relief measures to help its more than 24 million merchants around the globe that have been impacted by the COVID-19 pandemic. It allowed customers to request to defer repayment on business loans and cash advances, waived chargeback fees for merchants whose customers filed a complaint, and waived fees related to transfering funds from a PayPal business account to a bank account.

These measures are a relief for businesses and individuals who have been badly hit by the widespread lockdowns and store closures. By sacrificing fee income in the short term, the company is generating stronger customer goodwill that will endear customers to the payment portal for the long term.

PayPal also announced in early April that it can now provide businesses with access to small-business loans through the U.S. Small Business Administration Paycheck Protection Program. This allows the company to further assist small businesses through these challenging times. PayPal also waived the fees associated with its in-app cash-a-check feature for government stimulus paper check recipients, allowing more people to easily access their funds. 

Now what

PayPal has shown that it can forego short-term profits to support and assist businesses that may be in financial trouble. The company is doing the right thing during these challenging times by helping to ease pain points for consumers and alleviating the burden for businesses that may be strapped for cash.

With almost 300 million active accounts at the end of 2019 and healthy free cash flow of $3.9 billion generated last year, the company should be more than equipped to weather this crisis. With all the help it is extending to businesses during their time of need, customers will end up being even more loyal when the crisis eventually passes.

Royston Yang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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