PayPal (NASDAQ:PYPL) provides money transfer services and is a key player in the growing interplay between e-commerce and digital payments. This is a sector that has seen exponential growth in recent years, and PayPal has been a key leader in the space. Whilst there is increasingly more and more competition, PayPal remains one of the favourites to become a true “one-stop-shop” for modern-day digital financial services.
Consistent record of stock outperformance and revenue growth
PayPal spun off from its parent company, eBay, in 2016 with an IPO price of ~$35. The stock is now priced at ~$290, with a stunning market capitalisation of $340 billion.
In terms of fundamental metrics, the company has reached more than 400 million accounts worldwide, and in Q2 2021 accounted for a total payment volume of $311 billion. Looking at the top-line, revenue has doubled in the last 5 years, from $10.8B in fiscal 2016 to $21.45B in 2020, showing strong outperformance despite the COVID backdrop.
Management knows best
A key tool in analysing the sentiment and prospects of a stock is to look at what executive management or “Insiders” are doing with their hard-earned company shares. Due to their important positions at a company and to avoid illegal trading, insiders need to report the buying and selling of their company shares to the local regulator, which can then be tracked by the public.
Insider buying generally shows that the management team is confident in their company’s future and acts as a bullish signal to the market. Insider selling is seen as a bearish signal, as it appears that management may believe that the stock is expensive and has no further upside to it.
Despite the 150% return since Jan 2020, there have still been nearly twice as many PayPal insider purchases vs. insiders sales in 2021. This is a very positive sign and stands out compared to other tech companies, where the founders and management are aggressively selling their shares at the recent high prices.
And Wall Street agrees, as 51 research analysts out of a total 52 surveyed by Bloomberg rated PayPal stock as either a ‘Buy’ or ‘Hold’.
PayPal continues to expand its products and services across multiple digital finance pillars – cryptocurrencies, mobile payments, savings accounts, etc., with the goal of creating a Super App.
For example, Venmo is a popular and successful mobile payment service owned by PayPal, which allows U.S. users to transfer cash easily and safely between parties.
More recently, the company has been expanding into investment capabilities, first with the ability to buy and sell crypto-currencies, and last week news broke of PayPal’s plans to launch a stock trading platform to challenge the popular retail trading rivals such as Robinhood.
PayPal continues to be an important stock to hold in your portfolio, thanks to its ambitious expansion plans and its popularity across the investment community.