Will PYPL Stock Soar to New Heights?
Financial technology (fintech) is one of the hottest investment themes right now, and both established companies and start-ups want a piece of the action.
While that means competition is surely intense, one company that has already built an entrenched market position is PayPal Holdings Inc (NASDAQ:PYPL).
PayPal was founded in 1998 under the name Confinity. The company completed an initial public offering in 2002 but became a subsidiary of eBay Inc (NASDAQ:EBAY) later that year. In 2015, PayPal was spun off by eBay and became an independent publicly listed company again.
I’ve always liked PayPal stock for the simple reason that the company keeps expanding—whether as a subsidiary or a standalone entity. When I told Profit Confidential readers to check out PYPL stock just as it got spun off by eBay in July 2015, the company had a market capitalization of close to $50.0 billion.
Today, PayPal Holdings Inc is no longer a $50.0-billion company. Its market cap is now about $330.0 billion. That’s an increase of 560%.
One of the reasons behind the massive rally in PayPal stock is the sheer growth in its business. In 2015, PayPal had 181 million total active accounts. By 2020, the number had reached 377 million. (Source: “Investor Day 2021,” PayPal Holdings Inc, February 11, 2021.)
Better yet, customers are using the company’s services a lot more. In 2015, PayPal’s average customer conducted 28.1 transactions. The number then increased every single year, reaching 42.7 by 2020.
As you’d expect from this massive business expansion, PayPal Holdings Inc’s financials have improved a lot. From 2015 to 2020, the company’s revenue more than doubled, its adjusted earnings per share tripled, and its adjusted operating margin widened by 400 basis points.
Because of the nature of PayPal Holdings Inc’s services—it allows people to make online money transfers—the company thrived during the extraordinary economic environment brought by the COVID-19 pandemic.
Unsurprisingly, PYPL stock became an investor favorite last year. In 2020, PayPal stock’s price went up by 117%.
PYPL stock continued its upward momentum at the beginning of 2021 but has been consolidating most recently.
PayPal Holdings Inc (NASDAQ:PYPL) Stock Chart
Chart courtesy of StockCharts.com
Now, because the economy has been reopening, there’s not as much investor attention on stay-at-home stocks—including PayPal stock—as before. But the company is still growing.
According to its latest earnings report, PayPal generated $6.2 billion of net revenue in the second quarter of 2021, representing a 19% increase year-over-year. (Source: “Second Quarter 2021 Results,” PayPal Holdings Inc, July 28, 2021.)
The company’s total payment volume (TPV) was $311.0 billion, up by a whopping 40% from a year earlier.
At the bottom line, PayPal’s adjusted earnings came in at $1.15 per share in the second quarter, up by eight percent from the $1.08 per share generated in the year-ago period.
While we’re no longer in a stay-at-home environment, PayPal Holdings Inc continues to attract new customers. In the second quarter of 2021, the company had 11.4 million net new active accounts added, bringing its total active accounts to 403 million.
And the best is likely yet to come.
In the company’s latest earnings conference call, PayPal’s chief financial officer, John Rainey, said, “Given our strong year-to-date performance and our expectations for the back half, we’re raising our TPV outlook and reiterating full year revenue and earnings.” (Source: “PayPal Holdings, Inc.’s (PYPL) CEO Dan Schulman on Q2 2021 Results – Earnings Call Transcript,” Seeking Alpha, July 29, 2021.)
He continued, “We now expect TPV growth to be in the range of 33% to 35% given the strong volume trends in our business. We continue to expect revenue for the year to be approximately $25.75 billion representing 20% growth on a spot basis.”
Meanwhile, PayPal Holdings Inc’s adjusted earnings are projected to be $4.70 per share for full-year 2021, which would mark a 21% increase from 2020.
The reality is, despite being one of the older fintech companies, PayPal Holdings Inc still churns out extremely impressive growth rates.
If the company can continue growing its business and financials, new highs could be within reach for PYPL stock.