PayPal Holdings Inc (NASDAQ:PYPL) has had a bit of an off year so far. PYPL stock has swung wildly in recent months, plummeting below support on some days before crashing through its ceiling of resistance soon after. But even after all the action we’ve seen, share prices are more or less around where they started in January.
The problem with PYPL is that investors still want this $44 billion behemoth to deliver the fast growth ramp that vanished from the market when eBay Inc (NASDAQ:EBAY) snapped up the company months after its 2002 IPO.
A lot of people on Wall Street are still chasing a start-up that no longer exists, weighing PayPal on the metrics usually reserved for today’s start-up tech disruptors and recoiling in frustration when reality doesn’t line up.
Where PYPL Stock Stands Today
But PYPL is a relatively mature company now. Today, it’s more likely to make headlines awarding a service contract — like last week’s offer to Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) to handle cloud infrastructure for Braintree and Venmo — than for rolling out an innovative new service on its own.
Objectively, PayPal is an amazing platform and a fairly ruthless competitor. The company’s social app Venmo is crushing even Facebook Inc (NASDAQ:FB) payments. No matter how FB CEO Mark Zuckerberg tries to push users into the site’s in-house messenger system, Venmo is growing 140% a year, while Facebook payment revenue is shrinking. As PYPL management has figured out, mobile payments are where consumers want to be and they are ultimately where the growth is.
Overall, revenue is trending up by a healthy 15% to 17% a year and earnings per share are tracking similarly. PYPL stock isn’t a hyper-growth story, but it’s easily making double what other payment companies are posting and it is still growing faster than the majority of the stocks in the financial sector. By industry standards, PayPal stock is still a unicorn.
So the real question becomes this: how much is this unicorn worth? PYPL stock isn’t cheap at 22X current earnings, even when you factor in its growth curve. But as the only real pure play available on online payment, it’s worth a premium. Mastercard Inc (NYSE:MA) and Visa Inc (NYSE:V) are actually a little more expensive right now to reflect their dividends, and would-be dot-com competitors like GOOG and FB haven’t gotten enough traction here to pose a threat.
Keep in mind, too, that if V or MA want to catch up in mobile payments, PayPal stock could become an interesting strategic buy for them. PYPL just formed an alliance with V this quarter to work together on next-generation transaction systems, so if they continue to work closely, it’s possible PYPL stock could get scooped up again.
Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader, Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.