PayPal Deep Dive and Quantitative Analysis

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by snowmail-

So, PayPal.

As some may have seen the last couple weeks PayPal’s stock price has been on a down trend since the announcement of the Amazon partnership with Venmo (which PayPal owns). This will come into effect in early 2022. I really don’t see too much of a downside to this, Venmo has been supporting cryptocurrencies just this year and I see this as a direct line for amazon purchases to be paid via cryptocurrency. And if we keep seeing adoption rates rising then this could be a huge play for PayPal to hold the advantage over Affirm and other payment platforms.

Okay, Q3 Earnings.

For this quarter, we see an income increase of only 6% over Q2, 1.02b to 1.08 b. Net revenue increase of 13%, $5.4b to $6.2b, long term debt is down roughly $1 billion as well from Dec 2020. Total Liabilities was up 2b, mostly in accrued expenses and funds payable to customers. As a whole, PayPal’s debt came to $52 billion, and with annual revenue at $21.4b this is a tad concerning. Free cash flow increased 19%, and this year PayPal also increased spending in marketing and technology/development while decreasing spending for administration, so take this as you will.

Net new active accounts has fallen since last year by 12%. But, total payment volume since last year rose from $247b to $310b Number of payment transactions has also increased by about the same value (4%), but I see this increasing in Q1-Q2 of next year with Venmo partnering with Amazon. So as a whole there is strong customer engagement and a growing balance sheet.

Now, future outlook.

Paidy, a Japanese two sided buy-now, pay-later platform closed in October, so PayPal is looking to expand in Japan. This is big as Japans e-commerce is third ranking in the world. Along with this PayPal looks to develop more in app purchasing and expansion in various cryptocurrencies.

Recently there has been a lot of stirring in the news about PayPal needing to take a defensive stance against companies like Shopify, Affirm, and other BNPL services. On top of this Bernstein analysts downgraded their stock from a “buy” to “hold”. The headlines defiantly resonated poorly with stock price, now down roughly 4%.

Concluding this little deep dive I find it hard to believe that PayPal will be a roll over in the next two to three years, as they are one of a few market leaders in their sector. In my opinion the nose dive in stock price is somewhat of a knee jerk reaction, and PayPal is now in a nice place to buy in.

I’m also curious where everyone’s opinion is regarding PayPal.

Thanks for Reading.

Sources:

s1.q4cdn.com/633035571/files/doc_financials/2021/q3/Q3-21-PayPal-Earnings-Release.pdf

www.cnbc.com/2021/11/17/paypal-shares-drop-after-bernstein-downgrades-stock-.html

www.marketwatch.com/story/paypal-now-risks-gettingdisrupted-by-competitors-analyst-says-in-downgrade-11637160014

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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