9/17/2023 0 Comments Elon musk paypal stock![]() While I don't like to see the trend in operating margins, its FCF margins are reassuring. Despite its operating margins decreasing over the last few years, its FCF margins have stayed strong: Plus, the company generated $1 billion of FCF on $7.04 billion in revenue for the quarter, a 14% FCF margin. While its focus has been on enterprise clients, the company is now shifting its attention to small and mid-sized businesses, which will have much higher margin structures. Unbranded payments are a lower-margined business than PayPal's core unit, and its surprisingly high growth diluted overall margins.Īlthough this segment is likely to continue to put pressure on margins, management is addressing the issue through its value-added services within PayPal Complete Payments: Revenue from Braintree, PayPal's unbranded payment processing business, grew 30% YoY, a result of new wins and share gains among enterprise-level customers. Compressing MarginsĪlongside the lack of new account growth, sellers pointed to compressing margins as a cause for concern. PayPal remains highly relevant for customers and merchants alike. The competition narrative is legit, but the results paint a clear picture: PayPal has yet to be disrupted. While Apple Pay has seen a slow adoption rate since its release in 2014, Apple's $111 billion in annual free cash flow gives it plenty of potential ammunition. That said, Apple is still in the beginning stages of its rollouts in the fintech space. ![]() Payment Transactions also grew a healthy 13% YoY, supporting management's claim that they are prioritizing high-value accounts.īased on these figures, I do not see a reason to believe PayPal's competitive advantage is deteriorating. (where competition should be the fiercest) grew by 12% YoY: The more important metric to gauge PayPal's platform strength is Total Payment Volume (TPV), which increased 10% YoY:Īnd TPV in the U.S. While it's certainly a red flag, I'll be keeping my eye on, I don't think this metric tells the whole story. While active accounts grew 1% YoY, active accounts actually decreased by 2 million on a quarterly basis, the first such decline since at least 2014:įor sellers, this was evidence PayPal is losing market share to competitors and its network effect is showing cracks. ![]() In other words, what is the future for PayPal? I'm going to combine the competition and viability concerns into one section since they both revolve around 1 question: Will PayPal still be around in 5, 10, and 20 years, or will it be a shadow of what it once was? Sellers are most concerned about 3 things:Įach of these risks is covered in more detail below. PayPal reported strong top- and bottom-line growth, so why the 18% drop? Its most important non-financial metrics are 5.8 billion Transactions (up 13% YoY), $355 billion in Total Payment Volume (up 10% YoY), and 433 million active accounts (up 1% YoY). The company also completed $1.4 billion in share repurchases. Management also raised full-year EPS guidance to $4.95, which would represent ~20% YoY growth. Financialsįor the quarter, PayPal reported revenue of $7.04 billion (up 9% YoY), EPS of $1.17 (up 33% YoY), and FCF of $1 billion. Here are a handful of key figures from the report that will provide additional context for my thesis and guide the rest of this update. I believe the move was completely overblown, and PayPal remains one of the most attractive investments in the fintech space. Last week, PayPal released Q1 2023 results.įollowing the announcement, shares plunged to finish the week ~18% lower. It's not the high-flying growth stock with limitless potential it once was, but PayPal is beginning to mature into a high EPS, high FCF company that is positioned to grow steadily for years to come.Īnd at ~$61 per share, it's hard not to love the risk/reward profile. ![]() Sellers are overly focused on 2 metrics (active accounts and operating margins) while missing the stellar results the company continues to print in the face of competition. PayPal ( NASDAQ: PYPL) is one of the premier companies in the fintech space, an industry set to be worth ~$375 billion by 2030. Active contributors also get free access to SA Premium. It's easy to become a Seeking Alpha contributor and earn money for your best investment ideas. Editor's note: Seeking Alpha is proud to welcome Lincoln Olson as a new contributor. ![]()
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