eastunder
1 month ago
Tap to Pay on iPhone Now Available for Venmo and PayPal Zettle Businesses in the U.S.
https://www.prnewswire.com/news-releases/tap-to-pay-on-iphone-now-available-for-venmo-and-paypal-zettle-businesses-in-the-us-302082615.html
PayPal Holdings, Inc.
07 Mar, 2024, 10:00 ET
Tap to Pay on iPhone is now live for all Venmo business profile and PayPal Zettle users in the U.S.
SAN JOSE, Calif., March 7, 2024 /PRNewswire/ -- PayPal Holdings, Inc. (NASDAQ: PYPL) today announced that Tap to Pay on iPhone is now available for all Venmo business profile and PayPal Zettle users in the U.S., enabling them to accept contactless card and digital wallet payments directly on their iPhones with no additional cost or hardware. This is the latest development in PayPal's ongoing efforts to help small businesses sell more, grow their business, and manage their finances more efficiently.
Consumers are increasingly going cashless. More than 40 percent of Americans surveyed say that none of their purchases are made with cash in a typical week, and that trend is expected to continue. As a result, accepting card and digital wallet payments in person is increasingly table stakes for small businesses, but until recently, businesses have had to purchase and manage card readers to do so. With Tap to Pay on iPhone, PayPal is helping millions of small businesses adapt to this shift in consumer behavior in a fast, easy, and more affordable way.
"As consumers increasingly turn to non-cash options to pay, small businesses are looking for affordable and flexible ways to offer their customers more payment choice without being tied down to a fixed location," said Nitin Prabhu, VP, Small Business & Financial Services, PayPal. "With Tap to Pay on iPhone, millions of small businesses that use Venmo and PayPal Zettle can now start accepting contactless card and digital wallet payments nearly anywhere, directly on their iPhones, which can expand their customer base and drive incremental sales."
With Tap to Pay on iPhone, Venmo business profile and PayPal Zettle users in the U.S. can get set up in minutes and begin securely accepting contactless cards and digital wallets directly on their iPhones. They can also add taxes, accept tips, send receipts, and issue refunds. In addition, funds from sales will settle quickly into a business's Venmo or PayPal Zettle account, helping to streamline operations and manage cash flow.
Tap to Pay on iPhone will also enable Venmo business profile users to dramatically expand their customer base and accept payments from buyers even if the buyer doesn't have a Venmo account. They can also manage both their Venmo and card payment transactions directly within the Venmo app.
Venmo business profile and PayPal Zettle users like Saint Paul Spice Company and The Cheesecake Queen are already seeing success with Tap to Pay on iPhone.
"Enabling Tap to Pay on iPhone with our Venmo business profile was really easy, and my customers really love it because it's a quick and convenient way for them to pay," said Elaine Bailey, founder of The Cheesecake Queen based in Houston, Texas. "It's especially handy when I have a long line of customers and need to get payments processed quickly. The solution has made it so fast and simple to accept payments when I'm selling at popups and festivals, especially because a lot of my customers don't want to carry cash, and prefer to pay with a digital wallet like Venmo or with cards. My customers are actually amazed at the Tap to Pay on iPhone option provided through Venmo, it's by far the smoothest, easiest transaction method I've ever used!"
Small business owners can get set up in just a few simple steps and start accepting contactless cards and digital wallets through their Venmo business profile or through PayPal Zettle.*
eastunder
2 months ago
Decoding PayPal Holdings Inc (PYPL): A Strategic SWOT Insight
Thu, February 8, 2024 at 10:20 PM MST·4 min read
https://finance.yahoo.com/news/decoding-paypal-holdings-inc-pypl-052004372.html
PayPal's robust two-sided network connects millions of merchants and consumers globally.
Despite intense competition, PayPal maintains a strong brand and innovative payment solutions.
Opportunities for growth through strategic partnerships and expansion into new payment technologies.
Challenges include cybersecurity risks and evolving regulatory landscapes.
PayPal Holdings Inc (NASDAQ:PYPL), a leader in digital payment solutions, filed its 10-K report on February 8, 2024, revealing the company's financial performance and strategic positioning. With a focus on online transactions, PayPal boasts 435 million active accounts, including its popular Venmo platform. The company's financial tables highlight a solid foundation, with a total payment volume (TPV) showcasing the scale of its platform and the relevance of its services. As of June 30, 2023, PayPal's market capitalization stood at approximately $73.4 billion, reflecting investor confidence and market presence. This SWOT analysis delves into the strengths, weaknesses, opportunities, and threats as disclosed in the recent 10-K filing, providing investors with a comprehensive view of PayPal's market position and future prospects.
Strengths
Global Two-Sided Network: PayPal's greatest strength lies in its expansive two-sided network, which seamlessly connects 426 million active accounts, including 391 million consumer and 35 million merchant accounts. This network facilitates a diverse range of transactions, contributing to a TPV that reflects the company's significant market penetration and customer engagement. PayPal's ability to offer unique end-to-end product experiences reduces friction for both merchants and consumers, enhancing the overall transaction experience.
Brand and Innovation: PayPal's brand is synonymous with secure and convenient digital payments. The company's ongoing investment in technology and innovation has solidified its position as a trusted payment brand globally. With a suite of proprietary payment solutions and a commitment to security, PayPal continues to attract and retain users, further strengthening its market position.
Financial Health: The financial tables in the 10-K filing underscore PayPal's robust financial health. With a disciplined approach to growth and profitability, the company has maintained a strong balance sheet, enabling it to invest in new technologies and expand its offerings. This financial stability is a testament to PayPal's operational efficiency and strategic foresight.
Weaknesses
Intense Competition: The payments industry is highly competitive and dynamic, with constant innovation and shifting consumer preferences. PayPal faces competition from traditional financial institutions, emerging fintech startups, and technology giants expanding into payments. To remain competitive, PayPal must continuously innovate and adapt to changing market conditions.
Regulatory Challenges: Operating in a global market exposes PayPal to a complex web of regulations that vary by jurisdiction. Compliance with these regulations can be costly and operationally challenging, potentially limiting the company's ability to expand in certain regions or requiring changes to its business practices.
Cybersecurity Risks: As a digital payment platform, PayPal is inherently exposed to cybersecurity threats. Despite a comprehensive cybersecurity program, the risk of breaches and data security incidents remains a concern that could impact customer trust and the company's reputation.
Opportunities
Strategic Partnerships: PayPal has the opportunity to grow its core business and expand its customer base through strategic partnerships. By collaborating with various stakeholders in the payments ecosystem, PayPal can offer enhanced experiences, acquire new customers, and reinforce its role as a leading payment provider.
Technological Advancements: The ongoing evolution of payment technologies presents opportunities for PayPal to innovate and offer new payment methods, such as contactless payments, tokenization, and cryptocurrency integrations. Staying at the forefront of these trends can help PayPal capture new market segments and drive growth.
Global Expansion: With a presence in approximately 200 markets, PayPal is well-positioned to capitalize on the global shift from cash to digital payments. Expanding into emerging markets and leveraging its scalable platform can lead to increased TPV and revenue growth.
Threats
Regulatory Scrutiny: The payments industry is subject to increasing regulatory scrutiny, which could lead to new compliance requirements and restrictions. Changes in regulations or enforcement actions could adversely affect PayPal's operations and financial performance.
Technological Disruption: Rapid technological changes and the emergence of disruptive payment solutions could threaten PayPal's market share. The company must remain agile and responsive to maintain its competitive edge in an industry characterized by constant innovation.
Economic Uncertainty: Macroeconomic factors, such as fluctuating consumer spending patterns and currency exchange rates, can impact PayPal's business. Economic downturns or unfavorable market conditions could lead to reduced transaction volumes and affect the company's profitability.
In conclusion, PayPal Holdings Inc (NASDAQ:PYPL) stands as a formidable player in the digital payments landscape, bolstered by its extensive two-sided network, strong brand, and financial stability. However, the company must navigate a competitive market, regulatory complexities, and cybersecurity risks. Opportunities for growth through strategic partnerships, technological advancements, and global expansion are countered by threats from regulatory changes, technological disruptions, and economic uncertainties. PayPal's forward-looking strategies, including a focus on innovation and strategic partnerships, position the company to leverage its strengths and address its weaknesses while capitalizing on market opportunities and mitigating potential threats.
eastunder
2 months ago
PYPL Stock Forecast: A PayPal Turnaround IS Coming. Just Not This Year.
PYPL just revealed things are going to take a bit longer than expected
By Rich Duprey, InvestorPlace Contributor
https://investorplace.com/2024/02/pypl-stock-forecast-a-paypal-turnaround-is-coming-just-not-this-year/
PayPal Holdings (PYPL) issued a solid earnings report but offered weaker-than-expected guidance.
While transaction volumes were higher, the payments platform continued to lose active users.
New investments in AI, payment service provision and a cash app debit card could lift the stock going forward.
What have you done for me lately? That’s the approach this PayPal Holdings (NASDAQ:PYPL) stock forecast will consider. The payments platform that just reported fourth-quarter earnings and saw its stock tank after hours. Despite a solid beat on revenue and earnings, the market sold off shares because of soft guidance and a decline in active accounts.
The ailing fintech stock was barely keeping its head above water but is now at a loss for the year. Is it really going to be another dismal year for PayPal investors after the 20% loss or so in 2023? Or does a PYPL stock forecast indicate now is the time to buy in for the coming rebound?
Weakness in the PYPL Stock Forecast
Investors are going to need to more patience for PayPal’s turnaround to happen. Management is putting the pieces in place to engineer a return to growth. It’s just taking longer than expected for it to gain traction.
PayPal saw total volumes rise 15% from last year to $410 million with transactions up 13%. Payment transactions per active account also rose 14% on a trailing 12-month basis. Yet the number of active accounts declined 2% to 426 million. Essentially PayPal is getting users to do more with its service though it has less of them.
That led revenue to rise 9% to $8 billion handily, topping consensus estimates of $7.87 million. Adjusted earnings jumped 19%, rising to $1.48 per share, also beating Wall Street forecasts of $1.36 per share.
PayPal recently announced it was firing 9% of its workforce to help contain costs. The management plans to invest in other areas to help ignite growth. It’s good that PayPal is looking down the road instead of trying to please Wall Street here and now, but it means the turnaround is more difficult than believed and will take time to achieve.
Jumping on the AI bandwagon
PayPal continues to explore new opportunities. Last month it launched six new artificial intelligence (AI) enhancements to efficiently improve the checkout experience while also providing new discovery tools for merchants and consumers.
Although they appear derivative of what you can find elsewhere, it may help bring users back for more. Think of it as a necessary progression instead of a trailblazing development.
The payments platform is also investing more in Braintree, PayPal’s payments service provider. PSPs manage online payments for merchants, moving the money from the customer through the bank and into the business’s account.
Braintree authorization rates improved 240 basis points in Q4 and PayPal says it gained market share and greater merchant approval. Much of the transaction growth PayPal saw in the quarter was because of Braintree.
It is also expanding the reach with its Venmo cash app with the launch of a Venmo debit card. It notes cardholders are among its most-engaged users, with 6% of active Venmo users having a card. That suggests there is plenty of room for greater adoption.
Patience with PYPL
So should an investor buy now? PYPL stock looks undervalued. It trades at just 19 times earnings and 10 times estimates. PayPal has never traded at such low valuations in its entire time as a publicly traded company. The same goes for its price-to-sales ratio. It’s as low as it’s ever been.
Competition is fierce in payments, which pressures margins, but PayPal possesses a large platform trusted by both merchants and consumers. Unfortunately, it’s fairly limited to the e-commerce space which narrows its field of opportunity.
That’s why both Venmo and Braintree are where its growth potential lies. The launch of AI tools also bodes well for the future, even if they’re not any groundbreaking tools. It shows PayPal can adapt to new models. But I’ll take management at its word that we’re not likely to see much of a turnaround this year before things improve in 2025.
That’s why an investor could buy in now. Rarely does someone pick the perfect entry point and with the stock at a decent valuation and potential growth to come, picking up shares now and holding for the long term makes the most sense.
eastunder
2 months ago
PayPal's turnaround timeline catches investors off guard as company sees no FY24 EPS growth
12:47 PM ET, 02/08/2024 - Briefing.com
Rising competition in the payments space has taken a toll on fintech pioneer PayPal (PYPL), which has seen its revenue growth shrink to single digit levels in recent quarters as it loses share to companies like Apple (AAPL), Google (GOOG), and Affirm (AFRM). As such, expectations were muted heading into PYPL's Q4 earnings report with market participants focusing their attention on the future, looking for evidence that the turnaround plan from recently appointed CEO Alex Chriss is starting to take hold.
While PYPL comfortably exceeded those Q4 expectations with both EPS and revenue topping estimates, its weak guidance for FY24 indicated that a turnaround is going to take longer than anticipated. Specifically, the company said that it expects FY24 EPS to be about flat with FY23 at $5.10, falling well short of analysts' forecasts. This discouraging guidance caught investors off-guard, especially after PYPL announced a 9% workforce reduction in late January.Costs, though, do not seem to be the issue. In fact, in Q4, total operating expenses were up by just 3% yr/yr to $6.3 bln. Rather, the main problem for PYPL is that its payment platform has fallen behind the curve, losing traction with consumers and businesses. This is most clearly seen in the drop-off of branded transactions which are generated when consumers use the PayPal or Venmo app.These transactions are far more lucrative than unbranded transactions, or transactions that PYPL executes for businesses. A key metric that reflects this challenge is transaction margin dollars. In Q4, transaction margin dollars were flat on a yr/yr basis at $3.7 bln and PYPL doesn't see this improving much in FY24. During the earnings call, the company said that it expects transaction margin dollars to remain flat this year on a yr/yr basis.Adding salt to the wound, Mr. Chriss acknowledged that the product improvement initiatives he highlighted during his "First Look" presentation on January 25 are not likely to move the needle much in FY24. According to Mr. Chriss, the initial customer reaction to these product enhancements, including a faster checkout experience and an AI-powered recommendation tool called Smart Receipts, has been encouraging, but it will take time for them to contribute meaningfully to the financials.
The main takeaway is that PYPL's disappointing FY24 guidance offered a sobering reality check that there is no quick fix to the company's turnaround. Keeping a tight lid on costs and enhancing the platform's capabilities is a sound strategy, but the stock seems likely to be stuck in neutral until some tangible evidence emerges that stronger growth lies ahead.
eastunder
2 months ago
PayPal shares fall as 2024 forecast clouds promise of turning leaner, more profitable
https://finance.yahoo.com/news/paypal-shares-fall-2024-forecast-102416955.html
Thu, February 8, 2024 at 3:24 AM MST·2 min read
(Reuters) - PayPal shares fell nearly 9% in premarket trading on Thursday after it forecast a flat adjusted profit for 2024, disappointing investors who had hoped the payments firm's newly appointed CEO will reignite its growth.
On a post-earnings call, CEO Alex Chriss laid out a strategic plan to turn the company leaner in its pursuit towards profitable growth as well as ease pressure on its shares, which were one of the worst performers on the Nasdaq 100 Index in 2023.
Wall Street analysts said the outlook will weigh on shares in the near term but the new initiatives would likely bear fruit in time and benefit the company.
"It's clear that 2024 will be more of a transition year than we were expecting, with previously targeted operating leverage coming after 2024. We expect pressure on the stock as estimates come down," J.P.Morgan wrote in a note.
At current levels, if losses hold, the stock would lose roughly $6 billion in market value.
It trades at a forward price-to-earnings ratio - a widely-used benchmark for valuing stocks which compares its share price with projected future earnings - of 11.64, compared with rival Block's 21.08, according to LSEG data.
'MOVING THE NEEDLE'
"We're doing a lot of things to drive change internally and externally. However, nothing happens overnight. It will take time for some of our initiatives to scale and move the needle," said Chriss in a conference call.
Analysts at Morningstar said management's outlook suggests the road towards improving growth and profitability will be longer than expected.
"Management's commentary implied that PayPal won't see a meaningful improvement in either growth or margins this year," they added.
Paypal also said it will no longer provide an annual revenue forecast, a departure from regular practice and further clouding its outlook.
"Given the considerable changes underway at the company, we believe it is prudent to guide revenue one quarter ahead and provide updates as the year progresses," said Chief Financial Officer Jamie Miller.
eastunder
3 months ago
Payments firm PayPal to cut around 2,500 jobs
Reuters
https://finance.yahoo.com/news/payments-firm-paypal-cut-around-195622420.html
Tue, January 30, 2024 at 12:56 PM MST·1 min read
(Reuters) -Payments firm PayPal Holdings will cut about 2,500 jobs this year, Bloomberg News reported on Tuesday citing a letter from CEO Alex Chriss to staff that it reviewed.
In a letter to staff on Tuesday, Chriss said the decision was made to "right-size" the company through both direct cuts and the elimination of open roles throughout the year, according to the report.
The company did not immediately respond to a Reuters request for comment.
In November, newly appointed CEO Chriss said he expects to increase revenue outside of purely transaction-related volume and pledged to turn the fintech firm leaner by reducing its cost base.
Though the announcement helped rally the stock after third-quarter results, analysts have remained focused on PayPal's margins in recent quarters.
The company's low-margin business products have risen strongly, while growth in its branded products has slowed due to increased pressure from competitors such as Apple
eastunder
4 months ago
Amazon will no longer accept Venmo as a payment option starting next month
Aisha Malik
Thu, December 7, 2023 at 10:47 AM MST·2 min read
https://finance.yahoo.com/m/1d39b2c0-c1c6-372f-af4f-4bc4a2ab261b/amazon-will-no-longer-accept.html
Amazon is dropping Venmo as a payment option next month, the PayPal owned mobile payment service announced on its website. The official announcement comes as Amazon notified users last night via email that Venmo will no longer be accepted on Amazon.com starting January 10, 2024. Amazon will still, however, accept Venmo debit and credit cards.
"Due to recent changes, Venmo can no longer be added as a payment method," Venmo's notice on its website reads. "Venmo will remain available to users who currently have it enabled in their Amazon wallet until 01/10/24. "
PayPal spokesperson Joshua Criscoe told TechCrunch in an email that “Venmo and Amazon have agreed to disable Venmo as a payment option to pay on Amazon at this time. Customers can continue to add their Venmo debit card or credit card to their Venmo wallet to pay on Amazon. We have a strong relationship with Amazon and look forward to continuing to build on it.”
Since the news was announced, PayPal's shares have dropped by around 2%.
The reversal comes just over a year after Amazon announced that it would start allowing customers to make payments through Venmo on its website. At the time, the online retail giant said it wanted to offer customers payment options that were convenient and easy-to-use.
For Venmo, the deal meant that the company could move beyond P2P payments and grow its revenue through transaction fees through retail purchases. Although the integration didn't roll out until October 2022, PayPal announced that it had reached a deal with Amazon back in 2021 that would allow users to pay with Venmo. It then took a year for the integration to roll out.
Amazon spokesperson Alyssa Bronikowski told TechCrunch in an email that "customers can still use nearly a dozen other payment options, such as debit cards, credit cards, checking accounts, or installments to pay for their orders.” Amazon offers different payment methods from networks like Visa, Mastercard, American Express, JCB, Discover and more.
eastunder
5 months ago
PayPal Stock: Time To Load Up
https://seekingalpha.com/article/4651320-paypal-stock-time-to-load-up
Nov. 14, 2023 7:30 AM
Dair Sansyzbayev
Summary
PayPal Holdings, Inc. stock price has declined by 11% in the last quarter, which provides even better buying opportunities.
The company has several strong competitive advantages, which will highly likely allow the company to build more value for shareholders.
My valuation analysis suggests the stock is more than two times undervalued.
Investment thesis
My initial bullish thesis about PayPal Holdings, Inc. (NASDAQ:PYPL) did not age well since the stock price declined by 11% over the last quarter, which is underperformance compared to the broader U.S. market. Investor sentiment deteriorated mainly due to profitability metrics compression, which indicates that the company is losing its competitive edge to bears. However, revenue is still growing even in this harsh environment, and the management appears focused on delivering profitable growth. I consider the management's target to achieve high-quality growth to be doable given the company's strong reputation and global presence.
PayPal is also well positioned to leverage its data wealth amid the secular shift to machine learning to improve decision-making. My valuation analysis suggests the stock has the potential to double in price, which by far outweighs all the risks and uncertainties. That said, I reiterate my "Strong Buy" rating for PayPal.
Recent developments
The latest quarterly earnings were released on November 1, when the company topped consensus estimates. Revenue grew YoY by an impressive 8.4%. Despite revenue growth, profitability metrics narrowed. The operating margin shrank YoY from 17.1% to 16.0%.
According to the latest earnings call transcript, there were several unfavorable factors that weighed on the profitability. The management cited challenges in achieving the expected growth in its branded checkout services, with a notable deceleration after an initial rapid acceleration. The softening dynamics in branded checkout growth likely contributed to a decline in the transaction revenue. Pressures on the take rate for branded checkout also undermined profitability. Transaction margin compression also took place, according to the management. To me, from the secular standpoint, pressure on the company's operating profits is an indication of the intensifying competition. On the other hand, the company's capacity to deliver volume growth reflects its strong positioning among competitors and adaptability to the changing landscape.
But despite profitability demonstrating strength, PYPL's profitability is still very strong and has an "A-" grade from Seeking Alpha Quant. Wide profitability metrics allowed PYPL to generate over $2 billion in levered free cash flow [FCF] during Q3. This allowed the company to improve its financial position, as the company now has $11.6 billion in cash and cash equivalents. The leverage level is moderate, and the major part of the debt is long term. All in all, the company's balance sheet is strong and provides the company with opportunities to finance innovation and growth.
The upcoming quarter's earnings are scheduled for release on February 1. Quarterly revenue is expected by consensus at $7.87 billion, which means almost a 6.6% YoY growth. The adjusted EPS is expected to follow the top line and expand from $1.24 to $1.37.
Despite the bottom line challenges PayPal is facing, I am still confident in the company's future prospects. The company's data and scale are formidable assets as we are amid the beginning of the artificial intelligence [AI] era. As the digital payments industry becomes more complex and competitive, the integration of AI becomes crucial in the company's strategy. PayPal's wealth of data equips the company to unlock vast AI and data-driven capabilities, which is highly likely to provide the company with a competitive edge. I like that management recognizes these trends and is ready to invest in innovation to keep up with the evolving technological landscape and build shareholder value.
Apart from being well positioned to compete and innovate from the technological perspective, let us also not forget the company's massive scale. According to marketsplash.com, PayPal is accepted in over 200 countries worldwide, and among the top 1,000 retailers, a staggering 72% accept PayPal. The extensive reach reflects the company's adaptability to diverse markets and underlines its trustworthiness. Having a strong reputation and presence is crucial in an industry that processes customers' money.
The management's focus on high-quality and profitable revenue growth, highlighted during the latest earnings call, also adds optimism to me. As the management sharpens its focus on the sustainability of growth, it will likely add a sense of stability and resilience for investors. The decision to sell Happy Returns to UPS aligns with the management's plans to focus on more profitable activities and also looks consistent to me.
According to statista.com, the total global digital payments transaction value is expected to compound by 11.8% annually by 2027. I consider this a solid secular tailwind. As a strong player in the global digital payments ecosystem, PayPal is well-positioned to succeed in absorbing industry tailwinds.
Valuation update
The stock price declined by 27% year-to-date, significantly underperforming the broader U.S. market. Current valuation ratios are multiple times lower than historical averages across the board, which indicates substantial undervaluation. I ignore comparison with the sector median because of PayPal's massive scale and strong brand, which apparently deserves a premium compared to industry peers.
I also want to update my discounted cash flow [DCF] simulation. The TTM FCF ex-stock-based compensation [ex-SBC] margin improved to 10.7%, which I incorporated into my base year. I expect the metric to expand by 50 basis points yearly. Given the Fed's hawkish stance this time, I prefer to use a more conservative 12% WACC compared to the 10% the previous time. Revenue consensus estimates forecast an 8% CAGR for the next decade, which I consider fair enough to use for my simulation.
According to my calculations, the business's fair value is approximately $125 billion. That said, there is an above 100% upside potential, and my target price is $116.
Risks update
The most significant company-specific risk that I see is the leadership transition in the company. Dan Schulman, who has been PYPL's CEO since 2014, is expected to retire at the end of 2023. While the new leader might add fresh ideas and growth drivers, the transition of the CEO is always a risk as it increases the level of uncertainty regarding the company's strategic priorities and initiatives.
The digital payments industry is becoming more competitive as many tech giants like Apple (AAPL), Google (GOOG), and Meta Platforms (META) enter the market with their offerings. Global digital payments leaders like Visa (V) and Mastercard (MA) are also very strong competitors. The ability of PayPal to differentiate itself and maintain its market share amid such intense competition is a significant risk for investors.
Bottom line
To conclude, PayPal is still a "Strong Buy" for me. Given fairly conservative assumptions, the stock is massively undervalued, and I see more than a 100% upside potential. My analysis suggests that PayPal is well-equipped to be competitive, even given that hyper scalers like Apple and Google are also expanding to the digital payments field. The company's strong brand and trustworthiness among the largest merchants are also formidable assets.
eastunder
5 months ago
PayPal Beats Overall in Q3 Earnings, Outlook Up: ETFs to Tap
Sanghamitra Saha
Fri, November 3, 2023 at 6:00 AM MDT·3 min read
https://finance.yahoo.com/news/paypal-beats-overall-q3-earnings-120000185.html
One of the largest online payment solutions providers PayPal Holdings PYPL reported third-quarter non-GAAP earnings of $1.30 per share, which beat the Zacks Consensus Estimate by 6.56% and increased 20.4% year over year. Net revenues of $7.42 billion exhibited year-over-year growth of 9% on a FX-neutral (FXN) basis and 8.4% on a spot basis. The figure surpassed the Zacks Consensus Estimate by 0.37%.
Total payment volume amounted to $387.701 billion, reflecting year-over-year growth of 15% on a spot basis and 13% on an FXN basis. The figure topped the Zacks Consensus Estimate by 1.53%. The stock surged 6.6% on Nov 2, responding to the upbeat earnings results.
Quarter Details
Growing transaction and other value-added services’ revenues drove top-line growth on a year-over-year basis in the reported quarter. Transaction revenues were $6.654 billion (90% of net revenues), up 7% year over year. Other value-added services generated revenues of $764 million (10% of net revenues), up 25% year over year.
U.S. net revenues accounted for 57% of total revenues. The top-line figure increased 7% year over year to $4.257 billion. International revenues increased 10% on a spot basis and 11% on an FXN basis to $3.161 billion.
PayPal witnessed a year-over-year decline of 1% in total active accounts, which came in at 428 million in the quarter under review. The total number of payment transactions was 6.275 billion, up 11% on a year-over-year basis. Payment transactions per active account on a trailing 12-month basis were 56.6 million, which improved 13% year over year.
Raised Guidance
For fourth-quarter 2023, PayPal expects revenues to grow roughly between 6% and 7% on a spot basis and 7% to 8% on an FXN basis. Non-GAAP earnings are expected to grow roughly 10% year over year to $1.36 per share. For 2023, PayPal raised its guidance for non-GAAP earnings to $4.98 from $4.95, suggesting growth of roughly 21% over 2022.
More Upside in the Share Price Awaiting?
Based on short-term price targets offered by 29 analysts, the average price target for PayPal comes to $83.63. The forecasts range from a low of $60.00 to a high of $126.00. The average price target represents an increase of 61.89% from the last closing price of $51.66.
ETFs in Focus
Against this backdrop, one should keep a close tab on PayPal-heavy ETFs like Grayscale Future of Finance ETF GFOF, ETFMG Prime Mobile Payments Fund IPAY, Global X FinTech ETF FINX and Schwab Crypto Thematic ETF STCE for some modest gains. PayPal has weights in the range of 6.6% to 3.8% in the above-mentioned ETFs, respectively.
eastunder
6 months ago
PYPL Targets after earnings
All targets cut with lowest and highest targets marked
TD Cowen Adjusts PayPal Price Target to $62 From $66, Maintains Market Perform Rating
Citigroup Adjusts PayPal Price Target to $84 From $93, Maintains Buy Rating
JPMorgan Cuts PayPal Price Target to $80 From $100, Maintains Overweight Rating
Piper Sandler Trims PayPal Price Target to $66 From $67, Maintains Neutral Rating
Goldman Sachs Adjusts PayPal Price Target to $80 From $89, Maintains Buy Rating
Morgan Stanley Cuts Price Target on PayPal to $118 From $126, Keeps Overweight Rating
Canaccord Genuity Adjusts Price Target on PayPal to $100 From $110, Keeps Buy Rating
BMO Capital Adjusts PayPal Price Target to $90 From $100, Maintains Outperform Rating
JMP Securities Adjusts PayPal Price Target to $68 From $85, Maintains Market Outperform Rating
RBC Cuts Price Target on PayPal Holdings to $70 From $86, Keeps Outperform Rating
eastunder
6 months ago
PayPal Stock Still Has Plenty of Upside. Here's Why.
By Adam Spatacco – Oct 26, 2023 at 6:05AM
https://www.fool.com/investing/2023/10/26/paypal-stock-still-has-plenty-of-upside-heres-why/?
KEY POINTS
PayPal is quickly becoming sidelined by other fintechs such as SoFi, Block, and Adyen.
While competition is ripe, PayPal has several unique assets in its portfolio that are not operating at full potential.
The stock is trading near its lowest levels since becoming a standalone entity, making it an interesting time to buy some shares.
PayPal might not be growing as quickly as investors would like. But the company's new CEO could be the perfect solution for some much-needed new life.
One of the oldest staples in fintech is PayPal (PYPL 0.51%). The company founded by Silicon Valley legend Peter Thiel is nearly 20 years old, and was long part of eBay's ecosystem after eBay acquired it in 2002. Roughly a decade after becoming a subsidiary of eBay, PayPal acquired a company called Braintree (which owned the massively popular peer-to-peer payments app Venmo).
PayPal was spun out of eBay in 2015, and has been operating as a stand-alone entity since. During this time the fintech world has seen a surge in new entrants to the market. Whether it's buy now, pay later services, digital neobanks, or payment processors, there seems to be an app for just about everything. And PayPal is becoming increasingly vulnerable.
While the company may be seen as antiquated, I'll outline why PayPal still has a lot to offer given its multi-faceted operation. With the stock trading at rock-bottom levels, now could be a great time to buy the dip in a financially strong business.
Is PayPal a falling knife?
One of the more unique aspects of PayPal's business is that it helps both consumers and merchants. Consumers can use PayPal as a digital wallet, while merchants can use the platform as a payment service provider. This approach has helped PayPal build a two-sided network in which it can cross-sell a variety of different products and services.
However, during the company's second quarter, which ended June 30, PayPal reported total revenue of $7.3 billion, which was only 7% growth year over year. Some investors might find this level of growth uninspiring given PayPal's broad reach.
On the surface, I would tend to agree. However, a more thorough look might shine some light on the long-term picture.
PayPal is guiding toward free cash flow of $5 billion for 2023, which would be very much in line with historical cash flow generation. In turn, the company has been able to use its cash flow for a number of acquisitions, as well as share repurchases.
Yet despite building such a differentiated and prolific business, investors seem to keep punishing PayPal. The stock is trading near its lowest price-to-earnings (P/E) levels since it spun out of eBay almost 10 years ago and appears to be extremely discounted relative to peers (but more on that later). Given this dynamic, does PayPal have anything going for it, or is it a trap waiting for bag holders?
Take note of the new CEO
One of the most discounted factors for PayPal right now is its new CEO, Alex Chriss. Chriss is a former executive at personal finance company Intuit, and was the brains behind the company's acquisition of Mailchimp.
I see a lot of overlap between PayPal and Intuit, and it's not just because each of these companies operates in financial services. Intuit was long known for tools such as accounting software QuickBooks, budgeting app Mint, and tax service TurboTax.
But a few years ago the company turned heads when it acquired marketing automation start-up Mailchimp. Why would a company building a financial services suite want to buy a marketing automation platform?
Simply put, because it differentiates the business model. Intuit is far from the only company that offers tools that make accounting, billing, invoicing, and other tasks more manageable. But with the addition of Mailchimp, Intuit immediately increases its total addressable market, which provides the company with the ability to cross-sell its array of products to existing Mailchimp users.
In essence, Intuit evolved from a financial services software company that might have people using one or two of its products to a full-spectrum end-to-end provider for business owners. And Chriss was the driver behind the deal.
With assets such as Braintree, Venmo, and online coupons app Honey, PayPal has an portfolio of products that I think are operating below their potential.
There are numerous ways these subsidiaries can be further monetized, including debit cards and strategic partnerships aimed at leveraging PayPal products as exclusive online check-out options. But right now it seems PayPal's products are only used occasionally among consumers who have a litany of other competing services to choose from.
While I am not saying that PayPal has a game-changing acquisition up its sleeve, I do think that Chriss will figure out ways to transform PayPal and turn it into a connected ecosystem.
PYPL PE RATIO DATA BY YCHARTS
The chart above illustrates the P/E ratio over the last year for PayPal benchmarked against those of a number of competitors. PayPal stock trades far below payment processors Mastercard and Visa.
Moreover, PayPal's P/E of 15 is less than half that of rival Adyen, which has had its own series of challenges as of late. On top of all that, SoFi, Block, Shopify, and Affirm are not generating consistently profitable earnings, so including those companies in this analysis would not add much value.
The point I am trying to make is that while those companies offer convenient services for consumers, none of the other operations have figured out how to sustain profitability. PayPal, on the other hand, has strong free cash flow trends despite its muted revenue growth rate.
In other words, even as competition intensifies and growth decelerates, PayPal still manages to maintain a healthy financial profile overall.
PayPal stock is currently trading at 52-week lows. Moreover, given its depressed valuation relative to those of its peers, it's tempting not to buy.
I think investors are exiting positions in PayPal purely based on fear of the competitive landscape. While the threats from newer entrants seem very real, long-term investors should zoom out and think about the bigger picture. The company has a number of catalysts aimed at increasing user stickiness, and I personally believe the new CEO will inject some much-needed life into the operation.
While there is a lot to prove, the expectations for PayPal appear to be extremely low. I would take advantage of the price action and use this as an opportunity to dollar-cost average into a long-term position.
eastunder
6 months ago
PayPal Making Promising Moves Under The Surface
https://seekingalpha.com/article/4640840-paypal-making-promising-moves-under-surface
Oct. 15, 2023 1:00 AM ET
Joshua Hall
Summary
PayPal Complete Payments is a standardized payment processing platform for SMBs, offering optimized checkout experiences and value-added services.
PayPal is gradually rolling out one-click buying for its 35 million merchants. This should lead to higher conversion rates for merchants.
PayPal is introducing new value-added services to incentivize guest checkout users to create PayPal accounts.
PayPal is notifying users of their pre-approved Buy-Now-Pay-Later amounts which should increase adoption of the service.
Focused on the Fundamentals
In a recent Management Meeting, PayPal (NASDAQ:PYPL) executives went into details on some key business initiatives that they are rolling out. I want to highlight a few of these as they look promising for future earnings growth. Before I get started on this, I want to provide some helpful background on the business.
The following slide outlines PayPal’s 3 core business segments and how they overlap as it services both sides of the customer/merchant relationship as well as the network that connects them:
PayPal June 2023 Management Meeting Presentation
Wallet and Commerce includes the PayPal and Venmo apps and all the services contained within them.
Payment Service Provider includes Braintree, PayPal Complete Payments [PCP], and Zettle. Braintree provides payment processing and related services to large enterprises, such as Uber. PCP is a standardized payment processing service for small and medium sized businesses (SMBs). It is a relatively new offering and will be a focus of this Letter. Zettle was acquired by PayPal in 2021. It is in-store payment processing platform that competes with Square.
Network is where consumers pay for products or services. PayPal’s strategy is to drive its branded checkout where consumers checkout with Pay with PayPal or Pay with Venmo (now an option on Amazon). These transactions are higher margin. The company is focused on making branded checkout as frictionless as possible and adding value added services.
Roughly 1/4 of all e-commerce transactions go through PayPal and 25% of all payment cards (credit, debit, etc.) in the Western world are held in a PayPal vault. Given its existing market share, the PayPal opportunity lies not so much with payment volume growth, although that will continue to grow, especially with higher inflation, but with potentially growing its take rate by driving more higher margin branded checkout. PayPal’s take rate is currently 2%. If it was able to grow this to 2.5% on its current expense base, then free cash flow would double and the stock price would triple or quadruple, all else being equal.
PayPal Complete Payments
PayPal Complete Payments, or PCP, is a standardized payment processing platform for SMBs. It will accept any payment method and, notably, always provides merchants with the most up-to-date, optimized checkout experience (which is primed to enable branded checkout). This is a serious competitive threat for the likes of Block and Stripe. One of the issues that PayPal has with its merchant customer base is that they are using a string of older legacy platforms. By converting SMBs to PCP, it will ensure they are always on the current platform which PayPal can continually optimize for better customer experiences.
90% of PayPal's Braintree business comes from large enterprises. Management is focused on leveraging PCP within its Braintree business to sell its payment process capabilities to higher margin SMBs. In a recent conference, Acting CFO Gabrielle Rabinovitch, described this opportunity as follows:
In addition, we talked about PPCP [PCP], which really is bringing a full stack processing capabilities in a full-stack platform to SMBs. We've never been in this market. We've never had a product to compete in this market, and this is amazing white space for us when we think about what we can do for SMBs.
SMBs – the PayPal brand to Checkout button is sort of an essential need for most SMBs. And so we bring real conversion and real lift to their business. The ability now to offer sort of the stack that can give them everything they need with one partner, we think, will be very, very compelling. And that, of course, has a much higher margin profile than what we would have on the LE side.
PayPal's success or lack thereof with this move will be an important area of focus as we get more incoming data in the upcoming quarterly results.
In both PCP and Braintree, PayPal is looking to expand internationally, where margins are higher, and offer value-added services such as those depicted on the following slide:
PayPal June 2023 Management Meeting Presentation
In some of these categories, such as In Store, Risk as a Service, and FX as a Service, PayPal has minimal market share penetration. The cross-selling of these additional services enables the sale of deeper, end-to-end solutions which are higher margin.
One-click Buying
PayPal is gradually rolling out one-click buying for its 35 million merchants. The idea is that consumers will be able to check out with one-click when shopping with any one of these 35 million merchants. The way it works is your payment information is saved to a network vault so that the next time you go to pay you don’t have to set up or edit anything. This eliminates the issue of stale payment information stored with each individual site. The selling point for merchants is that there is a 90% conversion rate when consumers select PayPal versus only 50% to 60% for guest checkout.
There are about 1 billion users of guest checkout today. PayPal is looking to drive more of these consumers to create PayPal accounts by making value-added services available to them through their merchants if they do so. Here is how Chief Product Officer, John Kim, described some of these:
Let me show you some examples of things that we would do to drive users into becoming PayPal users. One example is package tracking. The value from the consumer is they get to track their packages from order all the way through delivery.
For the merchant, it does 2 things. One is that we've reduced the number of contacts for where is my package; and number 2 is we actually decreased the chargebacks related to non-delivered items. So whether they are a PayPal customer or a non-PayPal customer, we get to offer value added features and make it all available through the PayPal app.
A second example is smart receipts. With smart receipts, we're going to detail the items that are purchased, and then consumers can save these receipts to their PayPal Wallet for easy discovery, to track their history, to manage all of their finances. And within the wallet, what we'll do is we'll provide a surface. So it's very easy for merchants to cross-sell and upsell, giving merchants an ability to double the value of every given transaction, again changing the economics of using PayPal.
Given the scale at play here, it will be interesting to see how this change affects user adoption.
These additional service offerings are important to consumers because they increase convenience and peace of mind, especially when it comes to Buy Now Pay Later.
Buy Now Pay Later
PayPal is a leader in Buy Now Pay Later (BNPL), has an 81.6 Net Promoter Score (which is apparently very high and the highest in the industry), and was ranked #1 by Consumer Reports. This article details some of the issues that consumers have with this new service that competes with credit cards. Consumers will stop using these services if they run into major hassles. PayPal is not squeaky clean here but its focus on frictionless, security transactions should enable it to continue to stand out.
Management understands this so they are introducing enhancements. Notably, when it comes to BNPL, they are proactively communicating to 110 million users over the coming months what their pre-approved spending limits are, as the following slide outlines:
PayPal June 2023 Management Meeting Presentation
This will not only make millions of users aware that this service is even available, but it may encourage increased use of Pay with PayPal in general. [Note: I recently used this service myself after PayPal made it clear what my pre-approved amount was. It worked great and I will likely use this again in the future.]
This rollout is part of a greater effort by the company to deal with customer pain points when it comes to using BNPL services.
What I like about the direction of PayPal’s BNPL strategy is that it is not looking to take on the credit risk. It is looking to earn a fee on the transaction (merchants pay when customers use it) and then sell the short-term loan book to investment firms such as KKR.
Valuation
Over the long-term, I'm making the following key assumptions in my financial model for PayPal:
12% Total Payment Volume (TPV) growth
A gradual decline in the take rate by roughly 3 basis points per year
7% annual growth in costs and expenses
This would lead to operating margins climbing into the high-teens/low 20% range. Assuming the company devotes 80% of free cash flow to share repurchases going forward, this trajectory could have the company generating $10 of free cash flow per share in 3 years.
These assumptions could be conservative considering that TPV growth has averaged almost 24% annually over the last 8 years. Moreover, the fundamentals highlighted in this article could stabilize or even grow the take rate.
Here is the monthly log chart:
Courtesy of Barchart
My 12-month target price is $84 which 14 times the $6 of FCF per share that I think the company can generate in 2024. This is roughly the middle of this monthly trend channel.
The Key Risk
The key and immediate risk to the short-term performance of the stock is a faster decline in the transaction take rate due to lower margin large enterprises continuing to dominate its Payment Service Provider (PSP) business. This is why management's strategic focus on selling PayPal Complete Payments (PCP) to small businesses, international expansion, and valued-added services is so critical here. These are all higher margin transactions.
Strategic Conclusion
I like the "focus on fundamentals" direction that management has been steering the business in. PayPal continues to be one of my largest positions. The stock is trading for less than 10 times my 2024 free cash flow per share estimate and I see 45% upside over the next 12 months.
The stock looks like it is potentially putting in a significant long-term bottom and the details of this article have me suspecting that this will lead to earnings results that outperform over the coming quarters.
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