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Nasdaq Leads Wall Street Higher as PayPal, Sonos Climb

By Dan Caplinger – Jun 22, 2020 at 4:59PM

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The stock market got off to a good start on Monday.

The Nasdaq Composite (^IXIC 0.00%) has been outperforming the overall stock market for quite a while now, and Monday was no different. The index of Nasdaq stocks climbed more than 1%, going above the 10,000 level once again. The Nasdaq 100 index also posted a better-than-1% move higher.

Much of the rally among Nasdaq stocks in recent months has come from companies that offer ways for people to deal with the challenges that the COVID-19 pandemic has brought. PayPal Holdings (PYPL -3.12%) has benefited from greater use of e-commerce and the need to make electronic payments to pay for things online. Meanwhile, Sonos (SONO -1.56%) has benefited from demand from people staying at home to have more technological capabilities, and some rumors suggest it might get attention from a well-known company as a possible acquisition.

PayPal pays off

PayPal Holdings saw its shares move higher by 4%. Among the tailwinds that the payment processor has seen recently, PayPal got a vote of confidence from a stock analyst on Monday.

Building atrium with shrubs, office walls, and PayPal logo in glass.

Image source: PayPal.

Credit Suisse gave positive comments about PayPal, boosting its price target on the stock to $190 per share, the highest among analysts right now. The increase stems from the fact that investors simply aren't giving full credit to the payment processor's business prospects. PayPal has gained market share during the pandemic, with CEO Dan Schulman having said that April was "probably the strongest month for PayPal since we became a public company." That momentum continued into May, with record adoption of the platform from new users.

PayPal also stands to benefit from the success of partners around the world. The company invested $750 million last year in Latin American e-commerce giant MercadoLibre (MELI -1.89%), which has its own Mercado Pago payment processing system that's gaining similar traction across its territory. PayPal also licensed a majority stake in China's GoPay, opening up even more opportunities.

It's not surprising to see PayPal's ambitions becoming successful. The fintech stock has been on the cutting edge of the industry for quite a while, and it's putting itself in position to build on its growth in the years to come.

Sonos gets connected

Sonos' stock jumped 18% on Monday. The move came as the maker of smart speakers got a rare note of praise from a well-known stock researcher who's famous for short-selling ideas.

Citron Research said that Sonos has the potential to rise to $30 per share, more than double its current level even after Monday's gains. On one hand, the company has already seen its business boom during the pandemic, as people stuck indoors have looked for ways to upgrade their at-home living experience. At the same time, Citron believes that it might be an opportune moment for Apple (AAPL 0.23%) to look to acquire Sonos, pointing out that this week's Apple Worldwide Developers Conference would make a great forum for such a strategic move.

Interestingly, though, Sonos wasn't on an upward trajectory even before the pandemic struck. Today's gains weren't enough to bring Sonos to new highs, and the potential for a dilutive stock offering might be weighing on the company, at least in the short run. Some have questioned its ability to make the most of its market opportunity as well.

Home connectivity has become increasingly important, and shareholders hope that Sonos has figured out the best way to take advantage of demand. However, if an acquisition bid doesn't come quickly, then Sonos could lose ground just as quickly as its stock rose.

Dan Caplinger owns shares of Apple. The Motley Fool owns shares of and recommends Apple, MercadoLibre, PayPal Holdings, and Sonos Inc and recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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Stocks Mentioned

PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
PYPL
$84.26 (-3.12%) $-2.71
Sonos Stock Quote
Sonos
SONO
$13.92 (-1.56%) $0.22
Apple Inc. Stock Quote
Apple Inc.
AAPL
$150.77 (0.23%) $0.34
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$10,867.93 (0.00%) $0.00
Mercadolibre, Inc. Stock Quote
Mercadolibre, Inc.
MELI
$799.58 (-1.89%) $-15.43

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

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