PayPal Holdings Inc.

PayPal Holdings Inc.

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Company’s History

PayPal Holdings,Inc. is among the world’s top-ranking technology and digital payment platforms that facilitates transactional fund transfers online. The company is headquartered in San Jose, California, USA. PayPal’s inception can be traced back 1998 when a startup tech business called Confinity came into existence. Confinity later merged with X.com, another small tech enterprise that was dealing with internet banking services. The merger was then rebranded as PayPal in 2001.In 2002, the company went public, whereby it issued its IPO stocks at $13 per share, out of which it generated about $70.2 million of equity finance. Just after a few months of its IPO, eBay acquired PayPal wholly as its subsidiary company at $1.5 billion, with a valuation above $23 per share.

After the acquisition deal, PayPal operated as part of eBay for the next 13 years, when it then went public again to trade its stocks at Nasdaq as an independent entity. It means PayPal seized to operate as an independent company; its stakes were transferred to eBay (trading with the ticker symbol, EBAY). eBay stocks were subjected to 2-for-1 splits in 2003 both in 2003 and 2005 – which spontaneously increased the 300 shares to 1200 shares. The stocks then stayed unchanged till 2015, when activist investors overwhelmingly demanded for independence of PayPal from eBay. So, PayPal Holdings had to go public again. The agreed split has been mutual to both PayPal and eBay as their stock values continue to increase exponentially. The merger benefited the online retailer a great deal in the sense that PayPal added a competitive advantage of payments-solution to its system.

Currently, the company is trading at Nasdaq under the ticker symbol of PYPL.PayPal’s recent earning’s history exhibit a positive outlook. The company beat both Q3 and Q4 of 2019 by $0.09 and $0.03 above its targets, respectively. Come Q1 2020, the company missed its target by $0.09 – it later beat Q2 2020 by $0.19 above the target (Yahoo Finance). The Q3 payout is yet to be released in November 2020, and it is anticipated that the outcome would be exceptional.

Products

The company’s products include a combination of various payment solutions such as PayPal, PayPal Credit, Venmo, Braintree, Xoom and Paydiant products. It runs a two-sided worldwide technology platform that connects its customers. The customer base consists of merchants and consumers around the globe who depend on processing of payment transactions. The platform allows customers to purchase and pay for goods using their accounts. Also, customers can transfer and withdraw funds. Overall, PayPal offers state-of-the-art technological solutions for efficient transactions, which are increasingly becoming a tradition in the digital era. The global economy continues to move toward cashless transaction; this is even accelerated by the outbreak of Covid19 pandemic. Cashless transaction is not only safe and efficient, but also overcome the barrier to traditional transaction where customers have to present or receive hard cash in person. It overcomes inconveniences of time and geographical barriers.

 

 

Competitors

The mushrooming of e-commerce businesses – along with the transformation of conventional brick-and-mortar enterprise to embrace digital presence – has sparked the demand for digital payment globally. Although this scenario has promoted the growth of PayPal, it has necessitated the rise of several competitors in the industry. Stiff competition is expected to increase over time as the number of players increase and more innovations set into play. Thanks to the strong corporate brand image and collaborative partnerships that PayPal has consistently displayed, making it a global leader in the industry. Among the company’s main rivals include WePay, Google Wallet, Skrill, Authorize.Net, and 2checkout. Each of these competitors hasits profound uniqueness that keeps them outstanding.

Financials

PayPal Holdings, Inc. currently has a market capitalization standing at $218.386 billion. Its PE ratio (TTM) and EPS (TTM) are 85.42 and $2.18, respectively. The company is scheduled to report Q3 2020 results by November 2. It has been consistent in displaying year-over-year improvement, which is within the range of 23% (at current spot rate) and 25% (at FX-neutral basis).Besides, PayPal anticipates a 25% growth in its non-GAAP earnings.

PYPL: Quarterly and Annual EPS

Source: MarketWatch

 

PayPal Holdings Inc.

Source: Market Screener

PayPal Holdings Inc.

Source: Market Screener

PayPal Holdings Inc.

Source: Market Screener

Future Outlook

The data collected from the two different corporate analysts above reveals a progressive growth in both performance and company value, which makes PayPal stocks worthy of investment. In my expert assessment, I believe PayPal is the best pure play in digital fund transfers and transaction processing around the global e-commerce ecosystem and it continues to conquer a substantial market share over and above its competitors. Therefore, with a target price of $224.05, the company’s stock rating is overweight. Moreover, PayPal Holdings exhibits an upside future outlook owing to the new business collaborations it continues to embrace and implement. The payment company is also committed to capitalizing on the surging user growth.

The positive future outlook is also predicated on the various posts by market analysts in the Wall Street Journal.  For example, an article by MarketWatch dated November 21, 2020 reveals that PayPal stocks shot a record high soon after the company had introduced cryptocurrencies like Bitcoin to its platform. The report indicates that PayPal plans to allow its customers to buy cryptocurrency via their accounts and use them for merchant payments as well. The announcement alone helped the PYPL shares to surge by 5.5% above the price of its previous trading day (Bary, para.3). A successful implementation of this plan will obviously drive the stock value high up. Other experts view the introduction of cryptocurrency to PayPal platform as an opening avenue the will see the company to develop its own digital currency in the future to minimize its dependence on various correspondent banking systems and other card networks (Salzman, para.11).

Furthermore, PayPal has made it a corporate culture to provide financial support to startups and medium-scale businesses that have limited access to debt financing from the conventional banking institutions. This DNA continues to earn the company a great deal of goodwill from all the world. In turn, PayPal has incessantly attracted a substantial base of reputable venture capitalists who are the majority shareholders, and the trend is expected to continue. So, it would be encouraging for any investors to take the opportunity and invest in the company as early as now to benefit from the anticipated lucrative return the feasible future.

On the downside, PYPL stock may decline in the short-run owing to the current economic situation that has been destabilized by the impact of Covid19 pandemic. Also, the uncertainty is coupled by this US presidential election period that has seen the market rates drop drastically in the recent weeks (but it is temporal). Another possible flop the may occur – though not expected – is the that the crypto currency idea may not receive the anticipated acceptance by the customers because Bitcoin is highly volatile and it lacks intrinsic value(Salzman, para.6). Underperformance of the cryptocurrency plan might adversely affect the company’s stocks in the future.

 

Conclusion

I hold a strong position that PayPal will work out everything strategically and it share will soar tremendously in the coming days and the future beyond. However, this recommendation report is largely presented from a brokerage perspective, which could be marred with conflict of interest. It is advisable for investors to treat this recommendation report as a single factor for investment decision-making. They should also seek more information about PayPal from a myriad of analysts to equip them with in-depth knowledge to inform their ultimate decision.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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