Is It Too Late to Get In on This Millionaire-Maker Stock?


PayPal Holdings (NASDAQ: PYPL) is seizing a tremendous opportunity as more global trade transactions move to digital platforms, and the company's recent stock performance shows it. Shares are up more than 550% over the past five years, bringing PayPal's market cap to $ 311 billion as of this writing.

Some investors might watch this run and conclude they missed it, but PayPal continues to innovate and produce spectacular results every year. Here's why PayPal can continue to generate returns for millionaires.

Image source: PayPal.

Turn the digital wallet into a financial powerhouse

PayPal had excellent results across all metrics over the past year. Net new business and transaction volume saw record growth, increasing revenue and adjusted earnings per share by 21% and 31%, respectively.

The company introduced several new features over the past year to improve user interaction with the PayPal and Venmo apps, including Buy Now, Pay Later, Check Cashing, Cryptocurrency Trading, and QR Codes for the contactless checkout in the store.

QR codes could significantly expand PayPal's business as management saw its total payment volume from consumers increase by 19% with the new checkout option. PayPal has already signed 29 top brands to bring its contactless checkout technology to stores, including Nike and CVS health. All of PayPal's in-store checkout solutions, including Tap and Pay, generated a payment volume of $ 20 billion in 2020.

Despite all of the new features the company rolled out over the past year, management will be making even more changes to its digital wallets, according to 2021. PayPal plans to introduce personal financial instruments and investment alternatives in its apps. It was only recently that cryptocurrency trading was launched through Venmo, which could be another major driver of engagement. rival square In the past year, more than three million customers bought or sold Bitcoin in the Cash app.

PayPal has already released a Venmo credit card and only recently started allowing businesses to set up a profile in the app, which was previously used solely as a peer-to-peer (P2P) payment service. If businesses can open a Venmo account, consumers can get even better use of the app, increasing transaction growth and ultimately sales.

PayPal is a trusted platform for companies with a 29 million strong merchant network. Venmo is already a widely used P2P app that processed $ 47 billion in payments over the past year, an increase of 60%. If a wave of small business owners open accounts with Venmo to accept payments, it could spark the fire of an already explosive growth vehicle for the company.

New products drive transaction growth

Each of these new products, like the Venmo credit card, cryptocurrency transactions, and other digital wallet features, individually offer small opportunities for a company that processed $ 936 billion in payments over the past year. However, all of these products help drive essential returns for investors, as CEO Dan Schulman stated in the fourth quarter earnings report.

"All the new features that we introduced, whether crypto, buy now, pay later, the Venmo card, QR codes contribute to the use," said Schulman. "They add incrementals add incremental transactions. "

PayPal expects further growth in payment volume in 2021. According to management guidelines, sales are expected to reach $ 25.5 billion, an increase of 19% excluding currency changes. This should lead to a growth in adjusted earnings of around 17%. These are results that produce millionaires, and PayPal has consistently published these types of numbers for years.

It's uncertain where the stock will go in the near future as it trades at a high valuation of 59x Earnings Forecast, but I wouldn't argue too much about the high price. PayPal pursues a multi-trillion dollar addressable market. The company likely exceeded $ 1 trillion in 12-month declining payments volume in the first quarter and is still growing around 20% annually. It's not too late to put this growth stock in your nest egg.

This article represents the opinion of the author who may disagree with the "official" referral position of a Motley Fool Premium Consulting Service. We are colorful! Questioning an investment thesis - including one of our own - helps us all think critically about investing and make decisions that will help us get smarter, happier, and richer.


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