[ad_1]
Pay Pal
equities sold strongly during the recent market correction, bringing its valuation back to more reasonable levels. The growth story of the payment company is only more convincing.
PayPal released solid quarterly results on Thursday. Revenues were up 14% from the previous year, down 23% from the previous quarter, but this is largely due to the sale of a loan portfolio. Excluding this, revenue growth was 21%, which is in line with the pace of previous quarters. Earnings per share rose 17%, exceeding analysts' estimates, and the company raised its guidance for the rest of the year.
For now, this growth is mainly due to the growing use of PayPal's convenient payment button to pay for online purchases. PayPal does not indicate how much of its revenue comes from this channel, but Moffett Nathanson estimates that they accounted for 86% last year. However, analysts are not afraid of over-dependence, thinking that payment button volumes can continue to rise by 20% per year over the next three years.
On Thursday, PayPal also provided new information indicating that it is gaining ground on other important sources of revenue for its future. Braintree, its payment acceptance platform used by merchants like
GrubHub
and Stitch Fix, handled 1.64 billion transactions in the third quarter, up 33 percent from the previous year.
More importantly, the company is making progress in finding solutions to earn money on Venmo, its payment application highly appreciated by younger users. CEO Dan Shulman said that 24% of Venmo users had used the application to generate revenue for the company, a so-called monetizable action. That's up 17% in the second quarter. This includes the use of Venmo to pay for a merchant's goods and services, Venmo's "instant transfers" to users' bank accounts, and the use of the new Venmo branded debit card.
The company gave no details about the revenues it was getting from Braintree or Venmo – information that investors would appreciate. But the figures quoted are enough to show that PayPal is not just a payment button story.
Before reporting Thursday, PayPal's shares were down 17 percent from their September high, causing excessive optimism in the valuation. It is now trading at 28 times expected earnings, which corresponds to its average multiple since it's become an independent company and down sharply from 37 times earlier this year.
The recent market sell has affected many payment shares, a particularly active segment of the market. But PayPal is not a square, which still yields 105 times the profit in the long run. This downturn creates a rare opportunity to get an exciting growth share at a reasonable price.
Write to Aaron Back at [email protected]
Source link
