Buoyed by strong growth in e-commerce payments and mobile money transfers, shares of digital payment processor PayPal Holdings Inc. (PYPL) have been surging all year, so much so that the company now has a market value that has surpassed credit card giant American Express Co. (AXP) and one that is closing in on some of Wall Street’s biggest heavy hitters including Morgan Stanley (MS) and Goldman Sachs Group Inc. (GS).
As pointed out by The Wall Street Journal, with a market capitalization of around $83 billion, PayPal is valued at slightly more than American Express, which ended Friday’s trading session with a market cap of $82.1 billion. Meanwhile, Morgan Stanley’s market cap stands at $88.7 billion and Goldman Sachs has a market cap of $92.6 billion as of the end of trading last week.
Since the start of this year, shares of PayPal are up more than 65%. That compares to American Express, which has seen its stock gain around 24%, Morgan Stanley, which is up 11% and Goldman Sachs, which is down more than 2% since the start of 2017. On top of all that, the Journal, citing FactSet, noted PayPal is trading at a multiple that is around 32 times forward earnings. Visa Inc. (V) may have a much higher market value but it trades at 27 times forward earnings while MasterCard Inc. (MA) is at roughly 29 times and American Express is close to 15 times forward earnings.
In recent months, the San Jose, Calif.-based digital payment company has been inking a bevy of deals to become the dominant payment processor for the internet and on mobile. With a well-known brand name, it has been able to make inroads, which has sent the stock surging. In August, it struck a deal with Microsoft Corp. (MSFT) to give Skype users across 22 countries the option to send money to family and friends during conversations.
PayPal's strong showing is creating a divide of sorts on Wall Street as the company gears up to report quarterly earnings later this week on Oct. 19. Some analysts, including at Morgan Stanley, remain upbeat about the company’s prospects while others are concerned about the rise in the share price. Autonomous Research falls in the latter camp. According to the Journal, it said investors are pricing in perfection, which could set the shares up for declines if there are any issues with its quarterly earnings report. After all, it does have loans on its book and investors will want to know if growth is coming at an expense to profitability. There’s also competitors in the digital payment market circling. “When I talk to bulls, they’re in the nothing-can-go-wrong camp because it’s the only way to justify the valuation,” Craig Maurer, an analyst at Autonomous Research told the paper in an interview. (See also: PayPal Beats on Q2 Earnings, Raises Full Year View.)