The Federal Reserve (the Fed) has cut interest rates again, making it the third consecutive cut for the past three meetings this year. There are now a lot of implications that will stem from this latest pivot when they make their way through the economy. One thing is certain: stocks that facilitate this transition are likely to see their prices rise.

This is where the business services sector comes into play, as currency swings and interest rates will inevitably affect the buying power of domestic businesses and consumers, as well as those who operate in overseas markets. While online platforms like Shopify Inc. (NYSE: SHOP) might be at the top of investors' minds in this theme, vertical plays like payment processors are still not popular enough.

That is exactly why shares of PayPal Holdings Inc. (NASDAQ: PYPL) are an attractive proposition today; the company’s services will be in the eye of the storm in the coming months as online business activity and fulfillment start to pick up and create more demand.

Wall Street analysts and some institutional investors would agree, but before investors learn about those facts, they should begin by understanding what is driving PayPal stock right now.

Quarterly Results Show the Way for PayPal

Over the past quarter, PayPal’s investor presentation shows some key trends that are building further momentum and upside in the stock. Now that the stock trades at 96% of its 52-week high, the media is willing to recognize PayPal's key performance indicators (KPIs) when a lower stock price rendered them worthless.

Here are some of the main KPIs investors should remember today, starting with total payment volume (TPV). TPV rose by as much as 9% over the past 12 months, far from a figure expected to come out of a slowing business and a metric that is surely going to keep expanding in this new business cycle.

Then there is the revenue generated from these transactions, $7.8 billion, or 6% more than the prior year. Investors can be confident in this outcome because PayPal's monthly active accounts, which just reached 223 million, have grown by 2%, accompanied by an impressive 61.4 million transactions per active account, growing by 9% over the past 12 months.

It would seem that, as inflation pressures persist in the United States economy, more and more consumers are looking to mitigate their costs by buying more products through these online platforms, which rely mostly on PayPal for their payment processing.

More than that, the need to pick up a freelance job or secondary income online to supplement in times of inflation also helps PayPal, as most of these online jobs also rely on PayPal for its payment processing services.

Wall Street Analysts Like and Agree With The Trends in PayPal

Despite PayPal's rally of up to 46% over the past 12 months, Wall Street analysts still think that this company can stage another double-digit rally. Those at Macquarie and Barclays decided to make their optimistic views public in recent weeks.

As of December 2024, Barclays analysts kept an overweight rating on PayPal stock while also placing a valuation of up to $110 on the stock. From Macquarie, the ratings look more like an outperform and a $115 a share price target; keeping these two recent views in mind, investors are facing a net upside of anywhere from 28.7% to 34.5%, respectively.

All of these bullish factors lining up might be the reason investors can note that up to $5.7 billion of institutional capital made its way into PayPal stock over the past 12 months, backed by the expectation of even higher prices in the future. Of course, these expectations go beyond analyst ratings and price action; there are numbers to back them up.

For example, these same analysts are now forecasting up to $1.27 in earnings per share (EPS) for the same quarter next year, up from their current consensus of $1.07. Delivering an EPS growth rate of up to 19% is just enough to get the stock price to test new highs.

The cherry on top for investors comes from PayPal's stock’s valuation relative to its peers today. On a price-to-book (P/B) multiple, PayPal’s 4.8x valuation would stand significantly below the computer sector’s average of 7.8x today, a discount that makes PayPal a great risk-to-reward setup considering the growth and upside inherent in it today.