PayPal Is A Champion In Its Space, Trading At The Same Levels As Visa And Mastercard

PayPal is too big to be ignored in the financial technology space. Generating $ 6.1B in sales and growing at 33% year-on-year. Furthermore, the company is quickly entering new markets in order to stay relevant. It is doing so by creating a closed network of consumers, merchants and partners (other payment systems, banks, POS systems, website builders).

  • Venmo recently introduced its credit card and is adding new features (loyalty, rewards, cash back) to increase customer and merchant usage
  • Along with PayPal and Xoom, it processed $ 84B in P2P payment volume in Q1 ‘21 growing by 50% year-on-year. It offers loyalty features, rewards and cash-back incentives to users
  • We can see a compelling story made of opportunities in China, an expansion into Buy Now Pay Later, a significant foray into cryptocurrencies and a very strong foot in B2B with their POS offering

PayPal has a large established (and growing) user base and its foray into new markets only make it help more competitive in the online and offline world.


Fair Valuation

After taking off following the pandemic, PayPal is back trading in its historical range and close to fellow financial technology leaders, Visa and MasterCard.

  • PayPal trades at a PEG ratio of 2.8, slightly above MasterCard and Visa
  • In terms of PE ratio, PayPal is now trading in the same waters as MasterCard

BENCHMARK’S TAKE

  • After months of disconnect, PayPal is trading again in its historical range, offering an attractive entry point to careful investors
  • The company is not done innovating as it recently introduced its Buy Now Pay Later products and crypto-currencies offering

We have started a position in PayPal, representing 0.7% (approx.) of our portfolio.


Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Disclosures

The author has a position in PayPal Holdings, Inc. The author has no business relationship with any company mentioned in this article and the author is not receiving any form of compensation for this article other than contributions from paying subscribers.

Credits

Photo by Paul Felberbauer on Unsplash.