PayPal: Don't Ignore Venmo's SuperApp Potential

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PayPal: Don't Ignore Venmo's SuperApp Potential

seekingalpha2021-07-02

Summary PayPal’s leadership in digital payments has continued to grow from strength to strength, even though more challengers have since emerged. This clearly demonstrates the immense opportunities ...

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Nue
·2021-07-02
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fearedhouse
·2021-07-02
Hi
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Boink
·2021-07-02
Superapp
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AzuNyaa
·2021-07-02
Some likes :)
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kimchee
·2021-07-02
Like and comments
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- 虎狮驾到:
  Ok
  2021-07-02
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Surewin88
·2021-07-02
Gd stock ?
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- UTOtrader:
  u buy?
  2021-07-02
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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPayPal: Don't Ignore Venmo's SuperApp Potential\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-07-02 17:24 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4437569-paypal-dont-ignore-venmo-superapp-potential><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nPayPal’s leadership in digital payments has continued to grow from strength to strength, even though more challengers have since emerged.\nThis clearly demonstrates the immense opportunities ...</p>\n\n<a href=\"https://seekingalpha.com/article/4437569-paypal-dont-ignore-venmo-superapp-potential\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"PYPL","symbol_name":"PayPal","start_time":0,"source_url":"https://seekingalpha.com/article/4437569-paypal-dont-ignore-venmo-superapp-potential","article_id":"1108156772","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=1108156772","pubTimestamp":1625217845,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Summary\n\nPayPal’s leadership in digital payments has continued to grow from strength to strength, ev","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"PYPL":"PayPal"},"translate_title":"PayPal：不要忽视Venmo的超级应用潜力","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"PYPL":0.9},"content_text":"Summary\n\nPayPal’s leadership in digital payments has continued to grow from strength to strength, even though more challengers have since emerged.\nThis clearly demonstrates the immense opportunities for the leading digital payments players in the market.\nWe also think that investors may not have fully understood Venmo’s incredible potential.\nWhile we think PayPal’s robust business model offers a lot of potential upside in the years ahead, we are slightly cautious on its current valuations.\n\nInvestment Thesis\nPayPal (PYPL) is the leading digital payments player in the world. The company has operations in more than 200 countries, and posted392M active accountsin Q1’21.\nWhile we think that many investors and consumers have used PayPal before, they may not be fully aware of the company’s dominant market leadership that has allowed PayPal to generate high levels of EBIT and FCF profitability over the years, while also experiencing high revenue growth rates, leveraging on the secular growth driven by digitisation.\nRapid Growth in Active Accounts and TPV\n\nActive accounts. Data source: Company filings\n\nPayment transactions per active account. Data source: Company filings\nThe company’s leadership in digital payments is clearly shown in the growth of its active accounts, as it grew from 237M in Q1’18 to 392M in Q1’21, which represented a highly respectable CAGR of 18.3%. At the same time, PYPL has also been consistently growing its payment transactions per active account [TPA] over time to 42.2 in Q1’21. In fact, the company has continued to guide towards a higher TPA moving forward as a result of its ongoing efforts in using AI in its product development to further personalize the company’s offerings for its customers, as the company added:\n\n ... really excited about the commerce tab in the new wallet. That's all done through machine learning, personalization, working hand in hand with merchants to really create these demand curves, create the best offers and rewards tailored to each of our users. And that will just get stronger and stronger as we go forward. And what I would expect to see a year from now is you should start to seeTPA start to acceleratein terms of transactions per active [account].\n\n\nTPV trend. Data source: Company filings\nAs a result of PYPL’s continued success in growing its active accounts, we were thus not surprised to observe rapid growth in its TPV from $132.36B in Q1’18 to $285.45B in Q1’21, which represented a remarkable 29.2% CAGR over the last 3 years. We think PYPL is likely to continue experiencing rapid growth moving forward with increased e-commerce penetration, rapid growth in the P2P payments space through Venmo, and the company’s strong leadership and branding among consumers.\nPayPal's Strong Brand Leadership\n\nUse of and interest of payment apps among consumers in the U.S. in 2021. Data source: CivicScience\nBased on the survey shown above, we could clearly observe PYPL’s strong preference among consumers as 38% of respondents indicated they have used PYPL and liked it, easily outperforming its competitors.\nIn addition, according to Datanyze, PYPL has a54.35% market share, putting it way ahead of second-placed Stripe, which has a 19.14% market share, therefore giving PYPL a commanding leadership in this space. We think investors could now clearly observe how PYPL’s strong branding and leadership in the market has helped the company to post such fantastic active accounts and TPV growth over the last 3 years.\nWhile we think the space has gotten more competitive, with emerging players such as Square (SQ), Amazon (AMZN), Alphabet (GOOGL) (GOOG), and Apple (AAPL) gaining market share, we think the secular tailwinds driving growth in digital payments is large enough to accomodate the leading players, and we think PYPL’s leadership should see them continue to lead the growth in the years ahead.\nIn addition, PYPL’s growth with itsQR code paymenthas also helped the company to continue expanding its omni-channel approach in the digital payments space to include both online and offline merchants, in which PYPL has highlighted that they have been growing rapidly:\n\n And so I'm really pleased with the progress we've made. We're putting on a merchant location with QR codes something like every 25, 28 seconds right now. These are all pretty massive numbers that are going on, but it's a huge marketplace out there. But the thing is that it's clear that payments are becoming digital, whether they [are] offline or online, and it's clear that retailers are looking at things now in a fundamentally different perspective. They are not dividing things into online and offline. It is full omni for them. That really plays right into our strength, plays into the strength of the digital wallet, plays into our scale that we have, the trust that consumers have in us.\n\nTherefore, we believe that as the world’s economies start to reopen gradually, and footfall starts to return to the malls, we think PYPL’s QR code payment is likely to be a key beneficiary which would give the company's progress a key boost in the years ahead.\nDon't Ignore Venmo's Potential\nWhile we think many investors are more excited with Square’s Cash App recently, the market leader in the P2P space is actually Zelle, which generated a TPV of $272B in 2020, that is expected to grow to $500.82B by 2022 according to a report byeMarketer. This would thus represent a phenomenal 2Y CAGR of 35.7%.\n\nVenmo users and penetration.\nWhile Venmo is not expected to lead P2P's overall TPV, it is expected to continue its lead in terms of total number of users, as well as penetration rate, as the number of users on Venmo is expected to grow from 77.8M in 2021 to 107.6M by 2025, and more importantly would also give the company a commanding penetration rate of 61.8% of the market’s P2P mobile payment users by 2025. PayPal has also been open about its ambitions with Venmo, boldly asserting that: ”Pay with Venmo is obviously going to be a very large thing just like PayPal became a very large thing off eBay.”\nMost importantly, Venmo is also expected to experience rapid growth in TPV as Venmo’s TPV is expected to increase from $148.8B in 2020 to $304.52B by 2023, which would represent a CAGR of 27%. Therefore, we see a lot of opportunities in this space that we think investors may not have fully understood and factored into their expectations. The company clearly articulated what they thought about the Venmo opportunity:\n\n Venmo is like a nascent PayPal of like 5 or 6 years ago. If you look at the TPV annualized of Venmo and you look at the TPV of PayPal 5 or 6 years ago, they're equivalent. And the ability to monetize that user base, that growth rate is so exciting for us. And next year, we'll become profitable on the Venmo side. It's been a long time coming. I expect to see those revenue numbers continue to ramp quite nicely in the years ahead.\n\nWe think PYPL has certainly studied the blueprint of WeChat Pay (OTCPK:TCEHY) and AliPay (BABA) very well, the 2 dominant mobile payments platforms in China with a combined market share of over 90%. PYPL would continue to roll out even more features, and uses for its Venmo user base, with ambitions of making it a SuperApp:\n\n We got a whole bunch of things we're putting out. First of all, Venmo is going to become a digital wallet. And you know that the millennials that live on Venmo want to do more and more with them. That has been a clear ask that's been going on. They want to live their financial lives on Venmo. We're going to allow them to do that. We're going to take -- a lot of the functions that we're putting into the PayPal Wallet 2.0 that we'll talk about, the digital wallet, the super app, we're going to move it into Venmo as well. And Venmo has got a ton of things just on its road map right now.\n\nTherefore, we think that investors may not have fully understood PayPal’s ambitions in Venmo. The company is fully committed to making Venmo a great success.\nPayPal's Highly Profitable Business Model\n\nEBIT margin, projected EBIT margin, projected YoY revenue growth. Data source: S&P Capital IQ\nTherefore, we continue to expect this highly profitable company to continue delivering a solid profitability moving forward, with YoY revenue growth north of 20%, and with significantly improved EBIT margins above 25%, as compared to its LTM EBIT margin of 17.9%.\nValuations are on the High Side Though\n\nVarious valuation metrics. Data source: S&P Capital IQ\n\nNTM (TEV / Rev).\nWhile we are truly impressed with PYPL’s business model, and are highly excited about its future prospects, we are a little less excited about its current valuations. Even though the stock’s EV / FY+1 Rev is trading at about 12.9x, it’s still way above its 3Y mean of 7.75x. In addition, we also find its EV / Fwd (EBITDA - CapEx), which is used as a proxy to measure its FCF valuations, also looks quite expensive at 50.1x.\nWhile we think that the prospect of the company’s growth drivers certainly deserve a valuation upgrade above its mean, we also wanted to be a bit more careful of not chasing an expensive valuation (as it’s near the top of its 3Y mean of 13.78x), notwithstanding one with an excellent business model.\nWe are therefore cautious in trumpeting our bullish thesis on our concern with the stock’s valuation, and would prefer to rate the stock at neutral at this point in time.\nPrice Action and Trend Analysis\n\nSource: TradingView\nWhile there is no doubt to PYPL’s strong long-term uptrend, which certainly validates the stock’s status as a long-term leader, we were unable to find an optimal entry point based on the stock’s current price action. In addition to what we think is an elevated valuation at this point in time, we do not encourage investors to add more positions to PYPL right now, and would encourage patience.\nHowever, if a major retracement is to take place, we would surely be observing the $225 level to add to our positions. Investors should however also note that this level would get less relevant with the passing of time if the stock’s momentum continues pushing it higher, in which we would then look to revise our optimal entry points moving forward.\nWrapping It All Up\nThere should be little doubt in growth investors’ mind now just how robust and complete PayPal’s business model is, as it offers investors the elusive trifecta of high growth, high EBIT and FCF margins at the same time. While we remain very bullish on the company’s potential upside in the years ahead, we would prefer to wait for the next retracement before considering adding more positions.","kind":"news","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":156233382,"gmtCreate":1625223758446,"gmtModify":1703738705678,"author":{"id":"3583038013988308","authorId":"3583038013988308","name":"Nue","avatar":"https://static.tigerbbs.com/b8345100cc574b68844750cc9debaa37","vip":1,"crmLevel":2,"crmLevelSwitch":0,"authorIdStr":"3583038013988308","idStr":"3583038013988308"},"htmlText":"Like","listText":"Like","text":"Like","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/156233382","repostId":1108156772,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":156200977,"gmtCreate":1625222240099,"gmtModify":1703738670823,"author":{"id":"3565613490304898","authorId":"3565613490304898","name":"fearedhouse","avatar":"https://static.tigerbbs.com/c690bf7f98fdaf770c602f0b381fb343","vip":1,"crmLevel":6,"crmLevelSwitch":0,"authorIdStr":"3565613490304898","idStr":"3565613490304898"},"htmlText":"Hi","listText":"Hi","text":"Hi","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":4,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/156200977","repostId":1108156772,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":156626700,"gmtCreate":1625219865200,"gmtModify":1703738617999,"author":{"id":"3584620238111631","authorId":"3584620238111631","name":"Boink","avatar":"https://static.tigerbbs.com/c209643e8a7d239ba24db30470811841","vip":1,"crmLevel":4,"crmLevelSwitch":0,"authorIdStr":"3584620238111631","idStr":"3584620238111631"},"htmlText":"Superapp&nbsp;","listText":"Superapp&nbsp;","text":"Superapp","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/156626700","repostId":1108156772,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":156660608,"gmtCreate":1625218528904,"gmtModify":1703738587565,"author":{"id":"3560894228634455","authorId":"3560894228634455","name":"AzuNyaa","avatar":"https://static.tigerbbs.com/e65996a02c73a885a74a5e91062fa07e","vip":1,"crmLevel":4,"crmLevelSwitch":0,"authorIdStr":"3560894228634455","idStr":"3560894228634455"},"htmlText":"Some 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