PayPal cashes in on Online and Mobile Pay
There’s a lot more going on at PayPal Holdings (NASDAQ: PYPL) than the controversy over the North Carolina call center. The payment solution provider has been growing like a weed since it spun off from eBay Holdings (NASDAQ: EBAY) last year and that growth shows no signs of slowing.
A couple of recent Google searches uncovered some fascinating statistics about PayPal’s runaway growth including:
- The number of active registered PayPal users grew by six million during fourth quarter 2015, according to Statista statistics. The service had 173 million users at the end of third quarter, and 179 million users at the end of fourth quarter 2015.
- Venmo, PayPal’s social media payment app processed $2.1 billion worth of transactions in third quarter 2015. That was up from $1.2 billion worth of transactions in third quarter 2014.
- Venmo processed $1.624 billion worth of payments in second quarter 2015, and $1.3 billion in first quarter 2015. That means the services use is growing dramatically.
- The volume of transactions processed by PayPal increased by $19.74 billion during fourth quarter 2015. Statista reported that PayPal processed $69.74 billion worth of payments during third quarter 2015, and $81.52 billion worth of payments in the fourth quarter.
- PayPal’s revenue increased by $1.223 billion during 2015, it started the year with $8.025 billion in revenue and fished with $9.248 billion.
- PayPal’s net income increased by $809 million in 2015, rising from $419 million in December 2014 to $1.22 billion in December 2015.
- PayPal’s cash from financing increased by $3.589 billion in 2015. PayPal started the year with a negative cash from financing figure of -$51 million and finished with a positive number of $3.079 billion. This i that the company’s loan program is starting to pay off.
- PayPal’s cash from operations increased by $326 million in 2015. The company started the year with $2.22 billion in cash from operations and finished with $2.564 billion.
- PayPal’s cash and short-term investments grew by $1.181 billion in 2015. PayPal had $2.34 billion in the bank in December 2014 and $3.411 billion in the bank in December 2015.
- The volume of PayPal’s small business lending exceeded $1 billion in October 2015. Forbes writer Amy Feldman estimated that PayPal was lending $3 million a day to small businesses.
- PayPal predicted that Braintree would process $50 billion worth of payments in 2015 according to Fortune. If true that would be double the $23 billion that it processed in 2014.
- Braintree had 154 million consumer credit cards on file in 2015, an increase of nearly 100 million over 2014 when it had around 56.4 million cards on file.
PayPal could become the King of Payment
These numbers prove that PayPal is a very profitable company that generates a lot of cash. They also indicate that PayPal is on its ways to becoming the king of payment processing.
That makes this processor a definite value investment because it is cheap – the stock was trading at $38.26 a share on April 11, 2016. Yet it rewarded investors with a 10.84% return on equity.
My take is that we’re going to see a lot more growth at PayPal this year, because the company has a tremendous amount of momentum. A big generator of that momentum will be Venmo.
Pay with Venmo
PayPal is planning to launch a service called Pay with Venmo which will enable users of the app to pay at any merchant that takes PayPal. Currently, Millennials can only use Venmo to send payments directly to acquaintances on social media and in mobile apps.
That could be huge because the most popular SMS app, Facebook’s WhatsApp now reportedly has one billion users. Since Facebook (NASDAQ: FB) just announced end-to-end encryption for WhatsApp users, SMS could soon become the payment solution of choice for a lot of people because it is so secure.
Other major growth opportunities for Pay with Venmo could be bank payment apps like Chase Pay and store-based apps including Curent C, Target’s app and Walmart Pay. An even greater opportunity is Amazon which has launched its solution.
The decision to concentrate on Venmo could be a wise one because of the slow adoption of Apple Pay by major retailers. Even though Apple’s (NASDAQ: AAPL) payment solution reportedly has 800 million cards on file a lot of major retailers including Costco and Walmart are refusing to take it.
If you buy one payment processing stock as a buy and hold play, chose PayPal. It has the momentum and its capacity for growth is incredible.