Please ensure Javascript is enabled for purposes of website accessibility

Here's Why PayPal Stock Is Soaring Today

By Matthew Frankel, CFP® - May 7, 2020 at 11:06AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The payment processor's quarterly results gave investors several reasons to smile.

What happened

Payment processing company PayPal Holdings (PYPL 2.01%) was having an incredibly strong day on Thursday. As of 10:50 a.m. EDT today, shares of the fintech giant were up by 14% and hit an all-time high. The main driver behind PayPal's big move was its first-quarter results, which were released on Wednesday afternoon.

So what

From the stock's price action, it's fair to say that investors liked what they saw in PayPal's report. It didn't even matter than the bottom-line earnings figure missed analysts' expectations.

Woman typing on laptop computer.

Image source: Getty Images.

Here are some highlights: 

  • PayPal added 20.2 million net new accounts, including 10.2 million that came from its acquisition of Honey, and ended the quarter with 325 million active accounts. Excluding Honey, the 10 million new active accounts were a record for PayPal in a first quarter.
  • Total payment volume on PayPal's platforms grew by 19% year over year to $191 billion for the first quarter.
  • PayPal earned $0.66 per share (adjusted), after a negative impact from increasing its loss reserves. The company generated $1.3 billion in free cash flow for the quarter, representing 60% year-over-year growth.
  • It ended the quarter with $12.6 billion in cash and equivalents on its balance sheet, giving it plenty of liquidity if the pandemic worsens or losses unexpectedly spike.

Now what

PayPal provided some color on the performance after the first quarter ended as well, since the COVID-19 pandemic didn't have its full effects on the economy until very late in March.

In April, PayPal added 7.4 million net new active accounts, more than double the average number added per month during the first quarter. This means that PayPal added about 250,000 new accounts per day throughout April, a remarkable acceleration in growth.

Not only did PayPal report an excellent first quarter, but it also appears that its business is doing rather well during the pandemic.

Matthew Frankel, CFP 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$101.10 (2.01%) $1.99

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/13/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.