You know that old saying, “the student has become the master,” right? That’s exactly what I think of when I consider PayPal (NASDAQ:PYPL) and PYPL stock.
You may not remember that PayPal was first a part of eBay (NASDAQ:EBAY) before it was spun off in 2015.
Since then, the student has certainly eclipsed its master. While eBay does perfectly fine, one of the survivors of the dot-com bubble with its customer-to-customer platform, PayPal gives investors a way to bet on fintech and the digital banking revolution.
It’s there that PayPal is dominating. PYPL stock is up 220% since its initial public offering, smoking eBay’s 46% increase. PayPal now holds roughly a $100 million greater in market capitalization than its former parent.
PayPal Stock at a Glance
So far this year, PayPal is up 7%, which is a perfectly solid performance when the Nasdaq composite is stumbling along with an 11% loss.
In late January it reported fourth-quarter earnings of $4.96 billion, which topped consensus estimates of $4.94 billion, and a revenue increase of 17%. Earnings per share were 86 cents, which was better than the consensus estimate of 83 cents, and improved nicely from 69 cents the previous year.
The company said it added 37.3 million customers in 2019 to finish the year with 305 million active customers.
For the first quarter, PYPL says it’s expecting revenues between $4.78 billion and $4.84 billion, or 16% year-over-year growth. Earnings are expected to be released in early May. Analysts are looking for EPS growth of -2% for the quarter, but 6% growth for the year for PYPL stock.
Venmo Gives PayPal a Big Boost
Some people use PayPal to move money around, while other people prefer Venmo. This doesn’t really matter to PayPal’s officials, considering that money flows into their pockets either way.
The Venmo app is a peer-to-peer payment platform designed for use on mobile phones. The idea is that it’s easier to give money to a friend or family member through the Venmo app than it is to run to the bank or an ATM.
One of the more popular features of Venmo is that it also serves as a mini-social network. You can see transactions that your friends make, or even transactions that are happening near you. And if you don’t want your financial business out there for anyone to see, you can also hit a setting to make those transactions private or only seen by you.
PayPal says Venmo handled $29 billion in transactions in the fourth quarter, which is an increase of 56% from the previous year.
PayPal is also working on a way for both PayPal and Venmo to process transactions by scanning QR codes, which will be another way to make transactions simple and touch-free, PayPal CEO Dan Schulman told analysts in January.
PayPal Is a Disruptor
Much as Amazon (NASDAQ:AMZN) disrupts the retail space, PayPal disrupts banking. After all, why do you need to go to banks when you can move your money around from your computer, a tablet or your phone?
And why use legacy banks when PayPal offers the same kind of service without the messy fees that banks are known (and loathed) for?
Already, customers can use PayPal to make payments to some of the biggest companies on earth, such as Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX), completely bypassing the banks and credit card companies.
And now PayPal’s gone even further, getting permission from the U.S. Small Business Administration to distribute Paycheck Protection Program (PPP) loans to small businesses. That’s a huge get, considering many banks struggled with the paperwork when the program was first set up.
And it’s an implicit endorsement as PayPal as an alternative to the banking system on something as important as PPP.
Schulman says PayPal and Venmo have seen big surges of traffic in recent weeks because of the novel coronavirus, and he thinks both platforms will have a bigger role to play as we come out of our social isolation. He discussed this in a recent interview with Fortune:
I do think, as we’re seeing a new era of digital payments, that we’re not going to go backwards to what was. We’re not going to be using cash nearly as much. I think we’re all going to be aware of hygiene going forward. I think the use of QR codes in store is going to continue to increase, as we’re seeing it increase right now. And I think the more we can move into a digital economy, the more inclusive that can be. And we need to be sure that happens, because I do think digital forms of payments can be much more time-efficient – you don’t have to wait in line at a cash-checking location, you don’t have to wait in line to pay your bills. And number two, it can be done much less expensively.
The Bottom Line on PYPL Stock
While PayPal started out as a mere payment processor living in eBay’s shadow, it has now grown to be much more than that. And as we move ever-so slowly into a post-coronavirus world, touchless, simple financial transactions are going to be more important to customers.
That’s where PayPal will shine.
PYPL stock continues to be highly ranked in my Portfolio Grader, earning an “A” quantitative ranking and a “B” grade overall.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.