“It is a global company, available in 202 countries and also has 80% of the online payment processing on planet earth.”
Isn’t it impressive? Well, it’s just the tip of the iceberg. PayPal shares are a prized asset for any investor. You still don’t know why?
PayPal: A company with “pedigree”
In the family tree of PayPal’s founders, we find Peter Thiel, very famous in Silicon Valley. He achieved even greater fame supported Donald Trump when he was a candidate for president of the United States. At that time everyone believed that Hillary Clinton would win, but Peter got it right. Thiel was also an investor in the early days of Facebook and is co-founder of the innovative artificial intelligence company Palantir.
The other founder of the company is none other than Elon Musk himself, best known for Tesla and SpaceX. Other PayPal founders include Reed Hoffman, founder of LinkedIn; Chad Hurley, Steve Chen, and Jawed Karim founders of YouTube, as well as Russell Simmons and Jeremy Stoppelman, founders of Yelp.
With parents like that, you could bet that, at the very least, good genes will have the son. And so it has been.
PayPal was born to be a “Game Changer”
When PayPal was born it was revolutionary because to buy something online you had to have a lot of confidence to pay. PayPal solved a problem that the world had at the time because no one wanted to give out their credit card information and run the risk of having their information stolen.
But, in 2002 the company was bought by eBay for $1.5 billion, and in 2014 eBay did a spin-off that ran it as a separate business.
PayPal is a stalked company with big competitors
Since PayPal has been on its own, the growth couldn’t be more impressive as you’ll see below, but currently, PayPal has “barbarians at the gate” lurking.
Competition in the industry is huge.
However, PayPal’s “moats,” as Buffett calls competitive advantages, are very good.
That’s no small thing that PayPal has to deal with.
PayPal: growing financial muscle and stronger shares
Making big bets in territories with large populations is a good strategy. However, looking at its financial statements we see that it is a company that is not highly leveraged, as the debt/equity ratio is below 1.5.
Despite the fact that we don’t have a history beyond 2014, PayPal has proven to grow sustainably and, better yet, can continue to do so as there is every reason to be sure. Indeed, buying shares of PayPal is a great decision for any investor.
Its earnings per share (EPS) is predictable, it has good cash flow and management is doing an excellent job as evidenced by the company’s numbers. PayPal has a lot of cash that it can use to buy companies, undertake new projects, and even something that investors who hold its shares in their portfolios like a lot: paying dividends.
In addition, PayPal is benefiting from three trends of the moment: a) increased adoption of e-commerce; b) growth in global online consumption; and, c) increased use of digital and mobile payment solutions.
PayPal’s stock price performance
Since its separation from eBay, the stock has experienced a 440% gain outperforming the S&P 500 and Nasdaq 100 (by a lot)
With a performance of more than 90% over the past year, the stock is an undoubted winner, as its performance has outperformed the S&P 500 index and the Nasdaq.
The global pandemic has exceeded the 3-5 year e-commerce growth forecast, as well as accelerated the adoption of new online habits, which has also boosted PayPal’s growth.
Bottom line: 5 reasons to invest in and buy PayPal stock right now
1. PayPal is in a promising and growing sector
The area of payment services (as well as cloud computing, e-commerce, and telehealth) is one of the most promising sectors, with double-digit annual growth rates. The companies are usually profitable and have positive, incremental cash flows.
On the other hand, PayPal continues to show very rapid growth in terms of new accounts and P2P across all of its platforms. The number of active accounts held by PayPal is growing at an unstoppable rate, currently standing at close to 400 million.
PayPal, in particular, has seen its growth accelerate as a result of the pandemic, which is why the company has raised its targets for the next few years.
2. PayPal is an unstoppable money-making machine
Although PayPal is known primarily as an online and e-commerce payment system, the company generates more revenue than Mastercard.
In terms of quarterly revenue, in the past second quarter, the company has surpassed Visa. If, for example, the travel industry does not recover quickly from the effects of the coronavirus, it could be assumed that PayPal will also leave Visa and Mastercard behind in terms of annual revenue.
While payment providers such as Visa, Mastercard suffer a reduction in revenue, PayPal grew because of and despite the pandemic.
3. PayPal and its partnerships to dominate mobile payments
While the online and e-commerce sector is showing accelerated growth, PayPal enters into strategic alliances to expand its presence in the mobile payments sector.
In this context, the partnership with Instagram Checkout, which was finalized in 2019 should be mentioned.
Instagram Checkout allows users to make purchases of the desired product within the app. Previously, users were redirected to other sites to make the payment. According to company statements, approximately 130 million active users “click” on product offers within the Instagram app.
According to analysts, the sales potential of Instagram Checkout is over $10 billion by mid-2021.
Additionally, based on management’s statements during the earnings press conference, PayPal established business partnerships with Gojek, Mercadopago, and Mercadolibre, all leaders in their respective markets.
In addition, the company intends to expand its capabilities in China by partnering with Union Pay and another Chinese leader in this sector.
Relating to mobile payments, PayPal is seeking further monetization of its mobile wallet and P2P payment platform Venmo, which currently serves only the United States. According to the company, transaction volume increased by 52% to $37 billion in the latest quarter.
Additionally, the board plans to increase diversification and expand the business. The board mentioned during last quarter’s earnings announcement, among other things, the introduction of a new omnichannel with payment options for both PayPal and Venmo, new bill pay subscriptions as well as new credit types, and budgeting tools.
4. PayPal has already (successfully) embraced cryptocurrencies
And what will happen in the near future with PayPal if cryptocurrencies end up dominating the online payments scene? PayPal has it all figured out
Cryptocurrencies have certain inherent complexities and difficulties that make many users reluctant to use them. Most exchanges are unregulated; each user, in the case of custodianship of their own assets, is responsible for storing and protecting their private key; there are problems with banking cryptocurrencies afterward…
PayPal justly decided to enter the world of cryptocurrencies to solve many of these problems. Thus, in early 2021, it began offering this service to its US users, to which they are allowed to buy, sink and sell crypto starting at $1, in addition to spending it on their usual purchases. And all, as usual with PayPal, with great ease and simplicity for its users. PayPal, once again, managed to neutralize (and take advantage of) a threat by solving the problems it presented.
5. PayPal has money to innovate and to buy out its competitors
PayPal has a solid balance sheet. Therefore, PayPal can make more acquisitions if necessary, buying out its direct competitors, buy back its shares, or even pay dividends in the future, which can drive up the share price. PayPal’s cash or cash, cash equivalents, and investments reached $16.2 billion, while debt reached $9 billion as of June 2020.
PayPal’s cash and cash equivalents, cash equivalents, and investments reached $16.2 billion, while debt reached $9 billion as of June 2020. The great financial capacity that PayPal exhibits not only allows it to gobble up innovative companies that could pose a threat; it also invests large amounts of cash in innovation and development of new solutions that allow it to remain the undisputed leader it is today.