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PayPal, Dexcom and eBay: The only way is up?

Thanks to the global pandemic, being online rather than on the high street in 2020 seems to have worked out for many companies but there are exceptions to every rule. Payments provider PayPal and e-commerce behemoth eBay split into two separate public companies in July 2015. The online giants maintained an operating agreement, which came to an end in July 2020, but the fortunes of these two companies have diverged.

Elsewhere, the pandemic is not the only healthcare story in town, and investors may want to think more broadly for ideas…

Online payments system PayPal’s share price has been on a seemingly unstoppable rise since around April. The stock is now at an all-time high of close to $199 and many analysts believe it has further to go. What is spurring it on?

It is hardly surprising that a company which allows people to send and receive payments online is performing well in a year when a global pandemic sparked an online shopping boom. As we inevitably head to a cashless society, PayPal is very well-placed indeed to benefit from that.

In its earnings report for the second quarter of 2020, the company boasted record performance across most of its key financial metrics, with total payment volume growing 29% to $222bn, and revenue of $5.26bn, up 22%. During the quarter, 21.3 million net new active accounts were added and it reinstated its outlook for 2020, in which it raised its full-year guidance. PayPal has forecast revenue growth of 20% for 2020.

The company is not resting on its laurels. In May, it deployed QR code technology in 28 markets, which means that PayPal and Venmo app customers can buy and sell ‘touch free’. Selecting a pharmacy chain, CVS Pharmacy, as the first retailer to offer customers this technology at checkout in the US was clearly a strategic move.

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On the flipside, while PayPal, has been leading the US flagship S&P 500 index higher so far in 2020, despite reporting solid earnings, eBay’s share price has dwindled. At one point it sat as low as $50 and now finds itself around $58. There is the potential for the stock to move higher again though, as it seems likely that the marketplace will benefit from the long-term consumer shift to e-commerce.

eBay’s share price fell around 4% following its Q2 results announcement, even though the numbers were ahead of market expectations and led management to raise full-year guidance. On a reported basis, revenue climbed 18% to $2.9bn and the company added eight million buyers in the quarter, taking its total to 182 million global active buyers. For the full-year 2020, eBay expects net revenue between $10.56bn and $10.75bn.

But in the same set of results, management expressed a bit of uncertainty about the future, stating that it “is difficult to predict exactly how buyer behaviour, retail channel shifts, and changes in the economic environment will affect our volume over time”. This is likely to have sent the stock slightly lower, but investors who feel confident in eBay’s growth prospects may well want to make the most of the share price dip.

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Dexcom is front and centre of some of the latest developments in continuous glucose monitoring (CGM) for people with diabetes, an illness that affects around 214 million people worldwide and counting. CGM requires a very small sensor wire to be inserted under the skin, which monitors the glucose levels of diabetes patients throughout the day and night. It sends real-time data to the individual’s smart device and removes the need for a fingerstick meter, which involves drawing blood to get the same information.

Year-to-date, Dexcom’s share price has soared over 90%, making it one of the biggest climbers on the S&P 500. The stock has risen on some positive newsflow so far this year. In April, the Dexcom G6 CGM System was made temporarily available for remote patient monitoring in hospitals in the US, as the Covid-19 crisis escalated, and following feedback from the US Food and Drug Administration.

The company’s financials are also looking healthy. In July, Dexcom published its Q2 results, which revealed that it clocked up global revenue of $451.8m in the quarter, up 34% year on year, driven mainly by the US market. It also reinstated guidance for the year, forecasting 25% revenue growth to approximately $1.85bn. There is plenty of growth for the company to capture, given that the number of people diagnosed with diabetes is set to swell. No wonder Dexcom’s share price is sitting pretty at around $420.

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