PayPal (PYPL) is experiencing phenomenal growth that is generating more revenue and income.
For example, Statista estimates PayPal’s total transaction volume grew from $285.45 billion in the first quarter of 2021 to $310.99 billion in the second quarter of 2021. Additionally, PayPal’s total transaction volume grew from $221.73 billion in the second quarter of 2020.
The total transaction volume is all the money people spend on PayPal (NASDAQ: PYPL). Hence, more people are spending more money on PayPal. Plus, people are making payments through PayPal. Statista estimates PayPal’s annual payment volume grew from $712 billion in 2019 to $936 billion in 2020.
COVID-19 is good for PayPal
Thus, PayPal’s payments platform is growing like mad. Moreover, it appears COVID-19 is good for PayPal Holdings (NASDAQ: PYPL). To explain, PayPal is growing because more people are buying online. Additionally, more people are working from home and doing gig work, for which they pay employees through PayPal.
Financial numbers show that growth is translating into more revenue and income. For example, PayPal’s quarterly revenues grew from $4.618 billion on 31 March 2020 to $6.226 billion on 30 September 2021.
Moreover, the quarterly gross profit grew from $1.889 billion on 31 March 2020 to $2.89 billion on 30 September 2021. Impressively, the quarterly operating income grew from $398 million on 31 March 2020 to $1.043 billion on 30 September 2021.
The data also shows PayPal’s growth is sustainable as COVID-19 wanes. For instance, PayPal’s revenues grew by 13.7% in the quarter ending on 30 September 2021, Stockrow estimates. The revenue growth rate fell by 20.26% in the quarter ending on 30 June 2021 and 25.08% in the quarter ending on 30 September 2020.
How Much Cash is PayPal generating?
I find PayPal (PYPL) an attractive stock because it is both a financial service and a technology company. To elaborate, PayPal generates enormous amounts of cash, like a financial services company, yet offers the level of growth found in Silicon Valley.
For example, PayPal reported a quarterly ending cash flow of $19 billion on 31 March 2021. However, the quarterly ending cash flow fell to $18 million on 30 June 2021 and $951 million on 30 September 2021. Yet the quarterly ending cash flow rose from $918 million on 30 September 2020.
In comparison, the quarterly operating cash flow grew from $1.247 billion on 30 September 2020 to $1.513 billion on 30 September 2021. However, the quarterly financing cash flow fell from $2.48 billion on 30 September 2020 to -$816 million on 30 September 2021.
Thus, PayPal is paying off its debts. Notably, the total debt fell from $9.725 billion on 30 September 2020 to $8.7 billion on 30 September 2021. However, PayPal has less cash.
Conversely, PayPal’s cash and short-term investments fell from $14.241 billion on 30 September 2020 to $13.292 billion on 30 September 2021. Thus, PayPal finished the first 10 months of the great pandemic with less cash and debt.
What Value Does PayPal (PYPL) have?
PayPal (PYPL) gained enormous value during the pandemic. For example, the total assets grew from $54.266 billion on 31 March 2020 to $74.534 billion on 30 September 2021.
In contrast, PayPal’s stock lost some value in the past year. For example, Mr. Market paid $182.28 for PayPal on 2 December 2021, down from $214.12 on 30 November 2020.
I think $182.28 is high for PayPal shares, but I still consider PayPal an excellent company that grows and makes money. I consider PayPal an excellent company because it owns an impressive portfolio of subsidiaries.
PayPal’s subsidiaries include Venmo, Paydiant, Braintree, Xoom, Zettle, Hyperwallet, Simility, and Honey. Hyperwallet, for example, allows organizations to send mass payments to contract workers, freelancers, and sellers around the world. Hence, Hyperwallet is a solution for the gig economy.
In contrast, Simility claims to offer groundbreaking fraud protection through machine learning algorithms built by a team of data scientists. To explain, Simility’s data scientists build algorithms that can learn to detect fraud in PayPal’s ecosystem.
A Growing Financial Services Company
Finally, PayPal Zettle is a point-of-sale (POS) solution. They claim Zettle’s POS app and card reader transfers money into a merchant’s PayPal account, usually within one business day.
Zettle makes money charging a 2.29% transaction fee, 9¢ per transaction, $79 for the first card reader, and $29 for additional card readers. Hence, Zettle can generate subscription income and float.
Hence, PayPal Holdings Inc. (NASDAQ: PYPL) has a growing financial services platform that generates income. If you are seeking a growing and moneymaking financial technology stock, I think PayPal (PYPL) is worth investigating.
Originally published at https://marketmadhouse.com on December 2, 2021.
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