PayPal Holdings Inc (NASDAQ: PYPL) is at the right place at the right time.
Spun off from eBay Inc (NASDAQ: EBAY) in mid-2015, it’s up over 100% since then. And this is just the start of the ride.
There are two powerful trends underway that PYPL is in the middle of. And this could be a very exciting time for the company.
A Cashless Society Is Not a PayPal-less Society
First, PayPal is a significant player in the transition to a cashless society. This may sound like science fiction, but it’s fast becoming a reality. It’s in everyone’s — especially those in the financial and business sectors — interest to move in this direction since cash is time-consuming. And time is money and more importantly for financial services, time is margins.
The time it takes to count and store cash is time taken away from other potentially profit-making activities.
On the consumer side, ATM fees, having the proper amount of cash on hand or — God forbid — writing checks, makes the transaction process more cumbersome as well. Add in online shopping, and going digital becomes even more compelling.
PYPL is one of the biggest and oldest players in this sector. And now that’s it’s unlinked from eBay it can pursue opportunities with large retailers like Walmart Inc (NYSE: WMT), Amazon.com, Inc. (NASDAQ: AMZN) or Target Corporation (NYSE: TGT) — which would have been contrary to the interests to eBay.
Add to that, its newest and increasingly popular feature with Gen Z and millennials is peer-to-peer (P2P) payment system, Venmo. Basically it allows you to pay people over what is essentially a social media network instead of having to go through a bank or exchange cash or checks in person. Venmo gets a piece of the transaction, as is the case with most digital platform transactions.
Some recent studies have show that newer (P2P) payment systems are finding it harder to gain traction in the sector, Venmo is seeing significant growth. That is a bullish sign that not only is PayPal business growing, but so is its hottest property.
The Secular Economic Rebound Is Good for PYPL
The second trend worth noting is the secular economic rebound that’s happening. American Express Company (NYSE: AXP) just reported its Q1 earnings were up 31%. That is a huge move. And it shows that consumers are back in the borrowing and spending game in earnest.
PYPL has waded into the credit card market. And that business will likely increase as will its P2P solutions. The general trend right now is that this rising economic tide will raise the boats of payment processors. And the bigger you are, the higher you’ll rise.
Q1 earnings will be out early next week for PYPL stock and they should reflect the good news that has been coming every quarter now for a while. And none of this excludes any major deals with big partners. But to this point, PYPL just announced that its Venmo platform will be accepted on GrubHub Inc (NASDAQ:GRUB) in near future.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
