Paypal ($PYPL) Good Price & Good Fintech Company ? Competitor ?
My afterthoughts to Tiger_chat 's question of whether an investor profits from a good company or a good price ?
"Why not both" I asked myself ?
Wouldn't there be more upsides comparatively speaking ?
Having put the theory to test on different company types (see below for details); time to try it on FinTech stock; that I have always been curious.
Putting $PayPal(PYPL)$ to the test & see if it still fits the bill.
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An American multinational financial technology (“fintech”) company operating an online payments system in the majority of countries
Its core service is to support online money transfers, and serves as an electronic alternative to traditional paper methods such as checks and money orders.
It also operates as a payment processor for online vendors, auction sites and many other commercial users, for which it charges a fee.
Founded in 1998 ( originally as Confinity)
Founders were Max Levchin, Peter Thiel, and Luke Nosek
Went public via an IPO in 2002 at IPO $13 per share
In the same year, it was acquired by eBay (world’s largest online marketplace)
Strangely enough (7 years itch later), in 2015 it was “divorced from eBay”, spun off to be independent, standalone once again.
Like other mega cap companies, Paypal grew to its current size via strategic acquisitions to fortify both its operations and security of the apps.
In 2022, a year where US market had been hammered by extreme volatility and ease of covid pandemic restrictions - how did fintech stock - Paypal fare ?
Paypal - Summary
Revenue came in at $7.4 Billion vs $6.92 Billion (Q4 2021); that’s a +6.94% gain.
Net Income (GAAP) came in at $921 Million vs $801 Million (Q4 2021); that’s a +14.98% gain
Earnings per share (GAAP) was $0.81 vs $0.68 (Q4 2021); that’s a +19.11% gain.
Earnings per share (non GAAP) was $1.24 vs $1.11 (Q4 2021); that’s a +11.71% gain.
Paypal - Geographical Revenue distribution
Paypal’s earnings’ breakdown are as follows :
For a fintech company with international presence, its org structure is pretty streamlined. Only two market segments - US and International.
US market - $4.3 Billion vs $3.98 Billion (Q4 2021); that’s a +8.04% gain.
International market - $3.09 Billion vs $2.87 Billion (Q4 2021); that’s a +7.67% gain.
Paypal - Operating statistics
For a fintech payment company; its transaction volume growth is the “key” indicator into the state of health of Paypal.
For the concluded quarter, it managed to grow its volume by a credible +5%; that’s an achievement in itself - given the challenging environment from which most businesses operated under in 2022.
Paypal - Cross borders trade
Paypal - Total payment volume Q4 2022
For Q4 2022, Paypal’s international cross borders trade (CBT) volume managed to hold onto its volume; albeit a very marginal dip by -8.16% only.
Signs of volume stabilization is evident.
On the whole, overall Total Payment Volume (TPV) increased by +3.24% gain.
Another criterion for any online apps would be its customer’s database - growth and activity level.
For this, Paypal is registering an Active Customer account of 435 Million; that is a growth of 2%.
Paypal - Other Highlights
Paypal managed to grow its GAAP operating margin (profits) by 167 bps to 16.8% vs 15.2% (Q4 2021).
However its GAAP operating income fell by -10% to $3.8 Billion.
Paypal's CEO on Q4 2022 Results
We invested in our platform to better serve our customers, while focusing and streamling our business. We will continue this work throughout 2023 and I am confident that we are well positioned to utilize our unique assets to remain a market leader in the digital payments .... Paypal, CEO, Dan Schulman....
Is Paypal A Good Price Or A Good Company ?
Paypal vs Competitors
Like it or not, Paypal is still the undisputed “leader” in the online payment platform; taking the lion’s share of the market pie at closed to 80%.
Paypal - Growth drivers' diversity across its payment platform
Comparing its customers’ segment contributing to its bottom line; it is its “Unbranded processing” that was still registering growth of +6% during year 2022 Q4 where businesses were only beginning to get back to normalcy.
Paypal - Venture into new payment mode
The “Buy Now Pay Later” payment scheme is catching on very quickly (by both fintechs & financial institutions).
There exists a jostle between these 2 fundamentally institutions offering a “delayed”/ spaced out payment scheme that is especially useful for big ticket items purchased.
Although considered “late” to join the fray, Paypal has nevertheless managed to penetrate and hold its own grounds with its wide customers’ base. (Refer to above table for details).
Do you think there is a future for online payment platforms and Buy Now Pay Later payment schemes ?
Do you think Paypal will be able to maintain or better still increase its dominance in the Online payment arena ?
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