Don’t Wait: Buy PayPal Holdings Inc (PYPL) Stock NOW

PYPL stock started slow, but it's just getting started

PayPal Holdings Inc (PYPL) stock has been something of a disappointment since being spun off from eBay (EBAY) last summer.

Don't Wait: Buy PayPal Holdings Inc (PYPL) Stock NOWBut don’t let a short-term hiccup overshadow the long-term potential of PYPL amid the explosive growth of digital payments.

True, PayPal’s stock price has underperformed both eBay and the broader market since becoming an independent publicly traded company … but relax; it’s only been four months.

And just because PYPL stock has been a laggard lately, it’s a good bet that won’t last. After all, there’s a reason why billionaire activist investor Carl Icahn was so hot for relatively poky eBay to set PYPL free as a separate publicly traded company.

Cash, credit and debit card payments add up to about $13 trillion annually, according to an analysis by Accenture. The digital payments market is already growing at a healthy clip — as much as 8% per year. If just a small percentage of those $13 trillion in transactions move to digital, the market will explode.

Even more promising is the expansion of digital mobile payments. Consumers are expected to make more than $140 billion in mobile payments by the end of the decade, according to Forrester, a market research and consulting firm.

That was the impetus behind the PayPal spinoff. Sure, Apple (AAPL) Alphabet’s (GOOGL) Google, Facebook (FB), Twitter (TWTR) and newly public Square (SQ) are vying for a piece of the mobile payments pie, but PYPL has some distinct advantages.

It is and always has been a payments company first and foremost, with the infrastructure, customers, account relationships and brand identity that go with it.

PYPL Stock Just Getting Started

As a pure-play on the global growth of mobile payments, PayPal stock is tough to beat. Third-quarter revenue fell short of Wall Street expectations and guidance was soft too, but PayPal stock barely budged on the news.

In part, that was because of the strength PYPL showed in mobile with its Venmo app. Venmo lets customers make instant payments with their smartphones using money from their Venmo accounts or through links to their banks or debit cards. Transaction volume at Venmo tripled year-over-year.

And that’s just one app. PayPal’s portfolio of payments solutions includes Braintree, Xoom and Paydiant, among others, giving it the benefits of both scale and network effects.

You’ve also got to like the valuation. PYPL stock trades at a reasonable 24 times forward earnings considering its long-term growth rate of 17% a year. Indeed, that’s a bargain compared to the S&P 500, which goes for more than 17 times forward earnings despite a growth rate of less than 6% a year.

PayPal stock is off 1.5% from the closing price on its first day of trading. The S&P 500 is up about 0.7% over the same span, while eBay gained nearly 11%, but we’re just at the beginning of the story.

When it comes to winning in mobile payments, don’t underestimate PayPal.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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