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PayPal's (PYPL) Solid Crypto Momentum to Challenge Square

Zacks Equity Research
·4 min read

PayPal PYPL is gaining strong momentum in digital currency transactions as cryptocurrency prices continue to soar in the coronavirus-hit world.

This is evident from its cryptocurrency sales volume, which is sky-rocketing for the past two weeks. Reportedly, the company’s daily cryptocurrency transaction volume hit a record-high mark of $242 million.

This is a major positive for the company, which is deepening its focus toward bolstering its footprint in the digital currency space.

Additionally, the growing crypto momentum of PayPal is likely to pose a serious challenge to its closest peer —Square SQ — which is gaining strength from processing bitcoin transactions.

PayPal Holdings, Inc. Price and Consensus


PayPal Holdings, Inc. Price and Consensus
PayPal Holdings, Inc. Price and Consensus

PayPal Holdings, Inc. price-consensus-chart | PayPal Holdings, Inc. Quote

Cryptocurrency Holds Promise

A report from Fortune Business Insights shows that the global cryptocurrency market is expected to hit $1.8 billion in 2027 from $754 million in 2019, witnessing a CAGR of 11.2% between 2020 and2027.

Further, a Statista report shows that the number of daily bitcoin transactions at end of third-quarter 2020 exceeded the 351-millionmark, jumping significantly from around 200 million in first-quarter 2016.

In the data-driven world, cryptocurrency is proliferating on the back of robust blockchain technology, which enables peer-to-peer transactions in a decentralized way.

Moreover, the ongoing pandemic, which has strongly pushed for digital and contactless trading and payments, has resulted in increased demand for an alternative currency. This is a major tailwind in the cryptocurrency space.

PayPal’s Aggressive Stance

Given the upbeat scenario, PayPal, which helps merchants to accept crypto payments via partnerships with three major bitcoin payment processors — BitPay, GoCoin and Coinbase, isn’t content on resting on laurels, as evident from its growing crypto initiatives.

Recently, the company’s venture arm invested in the United States-based tech startup TaxBit, a firm that provides cryptocurrency tax automation software, which enables consumers and businesses to calculate the taxes owed on their cryptocurrency holdings.

Further, PayPal’s recent launch of a service, which allows its customers to buy, hold and sell cryptocurrency directly from their PayPal account, is noteworthy.

Additionally, the company’s intentions to enable cryptocurrency as a funding source across its 26 million merchants worldwide remain positives.

Square in Fray

Square, which facilitates the buying and selling of bitcoins via its Cash App, is riding on growing bitcoin revenues. This has turned out to be the key catalyst toits top-line growth.

In third-quarter 2020, Square generated revenues of $1.63 billion from the bitcoin category (53.8% of total revenues), rising from $148.3 million in the year-ago quarter.

The company is continuously gaining from the increasing uptake of Cash App, and strong customer demand and growth in bitcoin activities.

Square’s latest investment of $50 million to purchase 4,709 bitcoins is a major positive in regard to its strengthening efforts to bolster its presence in the promising cryptocurrency market.

We note that the investment, which increased the company’s bitcoin reserve, will enhance its cryptocurrency offerings.

To Conclude

Nevertheless, PayPal’s rising daily crypto volume is likely to strengthen its position in the intensifying cryptocurrency battle against not only Square but also other companies like Overstock.com OSTK and JPMorgan Chase & Co. JPM. These companies are also making concerted efforts to rapidly penetrate the booming cryptocurrency market.

Currently, PayPal carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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