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PayPal (PYPL) stock rose 7.11% while Square (SQ) stock rose 6.20%, on what is being attributed to the massive coronavirus stimulus bill that is making its way through the Congress.
On Wednesday, April 22, PayPal Holdings Inc (NASDAQ: PYPL) and Square Inc (NYSE: SQ) stocks rose considerably on what is being attributed to the massive coronavirus stimulus bill that is making its way through Congress.
The mid-week stock market closed in bulls as the oil industry stabilized globally after a free fall at the beginning of the week. The federal government is expected to pass a $484 billion stimulus package today, which left many stock markets rallying to the top.
Both the S&P 500 and the Dow Jones Industrial average indexes jumped by nearly 2% as of April 22, 1.30 p.m EDT. Investors are gaining more confidence despite the unpredictability of the situation at hand.
You might be wondering about the connection between the massive coronavirus stimulus bill and the two fintech companies. Here is a theory put forward by Mathew Frankel, Motley Fool certified financial planner.
Relation between PayPal, Square and Stimulus Bill Package
According to Frankel, the stimulus package adds $310 billion to the paycheck protection program (PPP), which ran out of cash last week. The money in the program is meant to provide forgivable loans to small businesses and help them cover their monthly employee payrolls and also other expenses.
He went ahead to relate that to the fact that PayPal and Square companies are both approved to process the loans to small businesses. Small lenders will receive $60 billion from the stimulus package to help them in the program.
Small businesses are set to receive a total of $660 billion in funding due to the coronavirus crisis. Putting into perspective, both PayPal and Square heavily rely on small businesses in their profits. With the huge boost in the small business, both fintech companies are getting some assurance that they will be in business amid the ongoing coronavirus pandemic.
Investors are anticipating that the stimulus package will be a plus in the two fintech companies’ valuation with time, hence betting on their stock markets bull rally.
According to Wall Street experts, the current consensus on the target price for PayPal shares is $124.83 per share. PYPL stock was at $115.19 (+7.11%) yesterday, having re-bounced strongly on the last month’s sell-off. Today in the pre-market, it is 0.24% down. The stock has gained 24.07% in the last month and lost 7.41% since the beginning of the year. PayPal shares have outperformed the Zacks Internet Software industry over the past six months, +15.6% vs +7.7%.
SQ stock gained 6.20% yesterday to trade at $60.96. Today it is 0.56% in the pre-market.