It’s time to break down a fintech giant. Here is the break down on $PYPL, otherwise known as PayPal.
Current Price: $253.76
52/Wk High: $309.14
52/Wk Low: $139.28
Market Cap: $298.1 Billion
Read below for the break down!
PayPal ($PYPL) is one of the most well-known technologies and payment platforms that is used for a vast multitude of digital transactions and payments.
PayPal’s platform is very popular among online retailers and is often used as a payment system amongst many digital shops.
Furthermore, PayPal’s portfolio consists of PayPal Credit, Venmo, Xoom, Braintree, Paydiant, and the original PayPal platform.
Recently, PayPal teased the idea of adding a stock trading feature to the app.
“We want to be that digital wallet that people look to and that has more to offer than any other wallet," CFO John Rainey said (Dow Jones Newswire).
The company has also received significant favor in recent months, after adding cryptocurrency features in November that include the ability to pay merchants using cryptocurrency holdings.
Another important innovation note surrounds Venmo, with PayPal adding the buy-hold-sell cryptocurrency feature to Venmo in April.
Digging into the numbers, PayPal beat Q1 2020 expectations with an EPS of $1.22, better than the analyst’s EPS consensus estimate of $1.01. On a year-over-year basis, EPS improved by 84.85%.
Revenues also experienced a significant jump, increasing by 29% year-over-year to $6.03 billion. For reference, the Q1 2020 revenues level was $4.6 billion.
Total Payment Volume (TPV) jumped as well, increasing by 50% year-over-year to a strong $285 billion. Breaking down TPV, merchant services volume increased by 54% and represents 94% of TPV while Venmo experienced $51 billion in TPV, representing 63% growth in Venmo TPV year-over-year.
PayPal’s user growth was strong as well, with the company adding 14.5 million Net New Active Accounts (NNAs) throughout Q1, bringing total net active accounts to 392 million. Although, it is important to note that the Q1 2021 NNA growth was 28% lower than the Q1 2020 NNA growth.
Operating income saw significant improvement, with operating income increasing by 162% year-over-year to a stronger $1.04 billion on a GAAP basis.
Shifting into margins, GAAP operating margin landed at 17.3%, representing a strong 865 basis point increase on a year-over-year basis.
Net cash provided by operating activities increased as well, totaling $1.758 billion and representing a solid 24% increase on a year-over-year basis.
Rounding out the quarter, cash flow from operations totaled $1.76 billion (up 24% YoY) while free cash flow improved to $1.54 billion, representing 27% expansion year-over-year.
Leadership was upbeat about the quarter.
“Our strong first quarter results demonstrate sustained momentum in our business as the world shifts into the digital economy. Our addressable market continues to grow as we launch new products and services for our 392 million active accounts.” CEO Dan Schulman said.
Management raised guidance as well, now expecting TPV growth of 30% and revenue growth of 20% for FY 2021. PayPal also expects to add 52-55 million NNAs throughout 2021.
Shifting into the balance sheet the numbers are solid. (Q4 2020 Levels)
Total Debt: $8.939 Billion
Total Liabilities: $50.360 Billion
Total Assets: $70.379 Billion
Cash & Short Term Inv: $13.083 Billion
On a valuation basis, PayPal does trade at a premium.
Price to Earnings: 71.23x
Forward Price to Earnings: 43.84x
Price to Sales: 14.09x
Price to Book: 14.76x
Price to Cash Flow: 39.50x
Management has been effective.
Return on Equity: 22.77%
Return on Assets: 6.90%
Return on Invested Capital: 14.94%
Given the numbers the analysts are bullish with a mean price target of $317.64/share, representing a 25.25% upside.
The high price target is $375.00/share, representing a 47.87% gain, while the low price target is $256.00/share, representing just under 1% upside.
The big money is quite involved as well, with 82.50% of PayPal being owned by institutions. Top holders include The Vanguard Group, BlackRock Institutional Trust, and Fidelity Management & Research.
According to the six-month charts, the MACD is moving with downside momentum within a range of 1.6 down to -0.86.
The six-month charts are also indicating an RSI of 45.21 and CCI of -110.50, both of which are on the low end.
In short, PayPal ($PYPL) is a clear leader in the fintech space, with expanding revenues, a growing user base, a reliable management team, and an increasing total addressable market.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.