- After an impressive 2020 performance, PayPal has pulled back from recent highs.
- The pullback is in part due to PayPal being lumped together with other ‘stay at home’ tech stocks that have sold off since Monday’s COVID vaccine news.
- The secular trend towards digital payments will continue to accelerate for a long time after COVID is in the rear-view mirror.
- This is a massive market and PayPal has become an ubiquitous part of daily life, entrenching its ecosystem at the forefront of the shift to digital payments.
- Near-term catalysts like in-store QR codes combined with more speculative long-term forays like cryptocurrency and central banks exploring retail digital currencies mean we could still be in the early innings of what has already been a fantastic investment story.
While the equities of many of the losers of the COVID era such as cruise lines, oil, hotels, airlines, and commercial real estate REITs have surged early this week on Pfizer’s announcement of a COVID vaccine with a 90% effective rate, many of the ‘work from home’ or ‘stay at home’ winners of the year sank on the news.
Obviously, the vaccine is good news for the likes of Carnival (NYSE:CCL) and Delta Air Lines (NYSE:DAL), and hopefully for planet Earth as a whole. Some of this year’s high-flying Nasdaq names were probably overdue for a breather, but some of the downward moves in some of the vaccine ‘losers’ seem unwarranted and if anything, present a rare buying opportunity.
While the vaccine has obviously had a massive impact on the markets in terms of rotations and positioning, it’s not like investors didn’t know one was coming eventually, so I’m somewhat surprised by the magnitude of several of these moves. In many cases, a crisis simply accelerates the inevitable – mall-based retail was already in trouble before the pandemic, and things like digital payments were already coming into the forefront long before the pandemic. These trends were propelled faster by the pandemic but ultimately are much too powerful to need the pandemic to continue ascending over the long term. One such name that stands out to me as a buying opportunity as a result of the pullback, even as the Nasdaq has bounced back somewhat since I began writing this article, is PayPal Holdings (PYPL).
(Image Source: PayPal.com)
PayPal shares have unsurprisingly surged this year, up roughly 70% YTD and more than doubling since their March lows. However, after Pfizer’s news, shares of PayPal have shed about 9% of their value, sinking to under $185 at time of writing. Interestingly, this follows another recent pullback and sharp rebound following its last earnings call, when PayPal slumped from around $191 a share the day before earnings to $179 a share the day after the call. The weakness was short-lived as two days later, shares were back above $200. I believe it’s feasible we should see another similar rebound, and more, once this current rotation subsides.
