PayPal's 39% Stock Surge in 2024: A Sign of Things to Come?

PayPal Holdings, Inc. (NASDAQ:PYPL) investors have had a rollercoaster ride in recent months, with the stock surging by 39% in 2024, outperforming the broader market. This strong performance can be attributed to several key factors, including the appointment of new CEO Alex Chriss, active account growth, positive earnings results, and analyst upgrades. Let's dive into the details and explore what this means for PayPal's future.



New CEO Alex Chriss' Impact

In September 2023, Alex Chriss, formerly of Intuit, took over as PayPal's CEO. His focus on PayPal's branded checkout platform and cost-cutting measures has contributed significantly to the stock's rally. Under his leadership, PayPal's operating margin improved by 194 basis points to 18.8% in Q3 2024, and management increased full-year earnings guidance from low to mid-teens growth to high-teens growth. Chriss' strategic vision and execution have clearly resonated with investors, driving the stock's impressive performance.

Active Account Growth

PayPal's active account growth has been a significant driver of its stock price increase. The company has worked on reinvigorating its top three checkout experiences and has rolled out the new versions to approximately 5% of its checkout traffic as of Q3 2024. Early testing showed measurable results, including 100-basis-point to 400-basis-point improvements in conversions on vaulted checkout and a 15% to 20% increase in the attachment of buy now, pay later loans to transactions. As the rollout broadens, PayPal could notably increase engagement among its 223 million monthly active accounts, further boosting its stock price.



Positive Earnings Results and Guidance

PayPal's Q3 2024 earnings results showed significant improvements, with the company raising earnings guidance for the full year. This positive financial performance contributed to the stock's rally. PayPal's steady gross margin declines have bottomed and begun reversing, with the company generating higher earnings per share today than at its former highs, despite lower margins. This demonstrates the strength of PayPal's business model and its ability to generate higher earnings despite lower margins.

Analyst Upgrades and Price Target Increases

Several analysts have upgraded their ratings on PayPal's stock and increased their price targets, reflecting their optimism about the company's prospects. For example, Darrin Peller of Wolfe Research upgraded the stock from "Hold" to "Buy" and raised his price target from $107 to $115, indicating a 28.36% upside. The average price target for PayPal stock from 29 analysts is $89.41, which predicts an increase of 7.26% from the current stock price of $83.36. The analyst consensus is "Buy," indicating that analysts expect PayPal's stock price to increase in the near future.



Looking Ahead

PayPal's strong performance in 2024 is a testament to the company's ability to adapt and execute under new leadership. With a new CEO at the helm, active account growth, positive earnings results, and analyst upgrades, PayPal's future looks promising. As the company continues to execute on its strategic vision, investors can expect more upside in the coming years. However, it's essential to monitor PayPal's progress and assess its ability to maintain its momentum.

Rating: Buy. PayPal's strong performance in 2024, coupled with its strategic vision and execution, makes it an attractive investment opportunity for long-term investors.