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Rewards Galore for PayPal Customers

American multinational financial technology company PayPal Holdings, Inc. (NASDAQ: PYPL) recently announced the launch of its PayPal Cashback credit card, which rewards consumers with cash back when they shop with PayPal. The card will be issued by Synchrony, a consumer financial services company.

Following the news, shares of the company declined over 3.5% to close at $117.25 in Tuesday’s extended trading session.

In a release, the company said that the new credit card allows customers to earn unlimited 3% cash back when paying with PayPal and unlimited 2% cash back on all other purchases anywhere Mastercard is accepted.

The new credit card will have no annual fee and category restrictions. Its customers will get a new user interface within the PayPal app and on the web.

Further, the existing eligible PayPal 2% cashback credit cardholders will automatically be upgraded to the new 3% cash back regime.

Management Commentary

The VP of Consumer Credit at PayPal, Susan Schmidt, said, “Our customers shopped across 34 different categories last year showcasing the diversity of their needs and interests, and we wanted to build a credit product that was flexible and better matched rewards with their spending behaviors. The new PayPal Cashback credit card was designed so PayPal customers can earn rewards and get cash back for everyday purchases no matter what categories they spend in that month.”

Stock Rating

On April 5, Stephens analyst Charles Nabhan initiated coverage on the stock with a Hold rating and a price target of $135, which implies upside potential of 14.8% from current levels.

According to the analyst, the ever-expanding base of e-commerce and the adoption of digital modes of payment remain “secular tailwinds.” However, re-acceleration of revenue growth and timely execution of initiatives may pose a challenge for the company.

The Wall Street community is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 29 Buys, 10 Holds and 1 Sell. PayPal Holdings’ average price forecast of $179.83 implies that the stock has upside potential of 52.9% from current levels. Shares have declined 53.5% over the past year.

Website Traffic

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), the world’s biggest website usage monitoring service, offers insight into PayPal’s performance this quarter.

According to the tool, the PayPal website recorded an 11.02% monthly decline in global visits in February, compared to the same period last year. Further, the footfall on its website has declined 10.44% so far this year, compared to the previous year.

Conclusion

The launch of this new credit card can be value accretive for PayPal, as it will help the company widen its customer base. However, increased costs can hurt its profitability and limit the growth of the stock price, which has been under pressure over the past year.

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