Watch Out for PYPL Stock
Despite a rough couple of months for the technology sector, PayPal Holdings Inc (NASDAQ:PYPL) is poised for massive gains. Digital payments are infiltrating all areas of commerce, and PayPal has the best range of services in town, making PYPL stock a valuable addition to any watch list.
The truth is that e-commerce is skyrocketing as a portion of overall sales in the economy, not to mention that our entire payments system is undergoing a massive overhaul. Unsurprisingly, there are new digital payments cropping up all over the place.
There are new ventures like Square Inc, Apple Inc.’s “Apple Pay,” and Alphabet Inc’s “Google Wallet.” Even the big banks want in on payments. Goldman Sachs, for example, recently launched “SETLcoin.” It is both a payments system and a cryptocurrency designed to replace modern currency.
What’s going on here? To put it simply, there is a lot of money up for grabs and everyone wants a piece.
Just think about how much money we spend on a daily basis. In the past, virtually all of those transactions would have been handled in person. If you took a taxi or went grocery shopping, you paid in cash. If you stayed at a hotel, you physically handed them your credit card. That is no longer the case.
Now you hop into an Uber and get out when you reach your destination. You lend absolutely no thought to how the transaction is settled because it happens so seamlessly. The payment is settled digitally through a credit card or PayPal account.
And instead of checking into a hotel, many are choosing to spend their vacations in an Airbnb rental, most of which are booked using a payments system developed by a company called Braintree.
And who owns Braintree? You guessed it: PayPal. The payments veteran paid a whopping $800 million to acquire Braintree in September 2013 when it was still a part of eBay Inc. Since then, the firm spun off in order to pursue a more aggressive strategy. (Source: “EBay’s PayPal Acquires Payments Gateway Braintree For $800M In Cash,” TechCrunch, September 26, 2013.)
Braintree was an excellent addition to PayPal’s portfolio, yet PYPL stock hasn’t reflected its enormous potential. Not only is Braintree running the payments platform for fast-growing services like Uber and Airbnb, but it’s also facilitating payments on Facebook’s “Facebook Messenger.” (Source: “PayPal Reports Strong Fourth Quarter and Full Year 2015 Results,” PayPal Holdings Inc, January 27, 2016.)
Many analysts think that messenger apps are going to be the next goldmine for advertisers, so it’s a safe bet that PayPal stands to make huge returns off these investments.
Another great addition to the company’s portfolio was “Venmo.” Venmo came into the fold as part of the Braintree acquisition. This app allows users to transfer money to their friends and family for free. It processed more than $1.0 billion of transfers in January 2016, which was a 10-fold increase from the same month two years before. It is growing at an astonishing pace.
The company waited until it had drawn this huge crowd to its platform before approaching merchants. By offering them access to a huge market, they’ve sweetened the value proposition on both sides. A lot of merchants are going to cough up the 2.9% fee just to accept customers who want to pay via Venmo. (Source: “Venmo: Its Business Model and Competition,” Investopedia, last accessed March 31, 2016.)
People are eager to pay through digital means, be it PayPal, Braintree, Venmo, or some other app. This is the future of payments and it could mean that PYPL stock will surf the wave to gargantuan returns, especially since it was first to market.