Portfolio Strength & Partnerships Aid PayPal (PYPL) Amid Headwinds

On Dec 30, we issued an updated research report on PayPal Holdings, Inc. PYPL. The company has emerged as one of the largest online payment solution providers on the back of its strong product portfolio and two-sided platform that enables it to offer smooth and secure transaction facility to both […]

On Dec 30, we issued an updated research report on PayPal Holdings, Inc. PYPL.

The company has emerged as one of the largest online payment solution providers on the back of its strong product portfolio and two-sided platform that enables it to offer smooth and secure transaction facility to both customers and merchants.

The company’s strong fundamentals are expected to continue driving the momentum across its operating fields, which, in turn, will bolster its financial performance.

Notably, PayPal delivered an average positive surprise of 8.21% by surpassing the Zacks Consensus Estimate in three of the trailing four quarters and missing the same once.

Coming to the price performance, shares of the company have returned 114% over a year, outperforming the industry’s rally of 109.1%.

 

 

Portfolio Strength & Strategic Partnerships

The company’s persistent efforts toward strengthening the services portfolio are helping it in gaining traction across customers.

The company is witnessing solid growth in its key metric — total payment volume (TPV) on the back of Venmo— its peer-to-peer payment service —which is driving growth in the active account base with the aid of strong monetization efforts and robust features.

Further, One Touch —which has emerged as the key growth driver behind PayPal’s accelerating mobile volumes, owing to its robust mobile checkout services —is contributing to the merchant and customer base.

Additionally, the company recently unveiled Pay in 4, a buy now pay later installment solution, in a bid to deliver an enhanced payment experience to merchants and their customers.

Notably, the new solution enables merchants to allow their customers to make payments for purchases of $30-$600 in four interest-free installments over six weeks. Pay in 4 has expanded the company’s Pay Later solution offerings and overall services portfolio.

Apart from the robust product portfolio, PayPal’s partnerships are shaping up its growth trajectory.

The company’s ongoing partnerships with Visa V and Mastercard MA are strengthening its international footprint.

PayPal’s debit card, namely PayPal Business Debit Mastercard in collaboration with Mastercard, has been made available in five European countries, which include Ireland, Italy, Spain, Austria and France.
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Further, the company recently extended the partnership with Visa in a bid to expand its Instant Transfer services to the global markets, thus, enabling fast domestic and cross-border digital payments.

Furthermore, as mobile wallets are becoming mainstream in the digital payments space, PayPal’s extended partnership with Citi C in an effort to allow the latter’s institutional clients to make payments into customers’ PayPal digital wallets remains noteworthy.

Persisting Risks

However, increasing credit loss reserves, owing to macroeconomic projections on account of the coronavirus outbreak is concerning.

Further, intensifying competition in the online and digital payment market remains a major risk to the company’s position.

Additionally, the nature of business makes PayPal vulnerable to foreign exchange risk. A significant part of the company’s operations are international and thus, appreciation or depreciation of the U.S. dollar versus foreign currencies such as the British Pound Euro, Canadian Dollar and Australian Dollar could impact the company’s financial results.

Currently, PayPal carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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