Mr. Market thinks PayPal (PYPL) is in decline. For instance, PayPal’s share price fell from $204.64 on 10 November 2021 to $91.03 on 11 November 2022.
Thus, smart value investors will ask if PayPal Holdings Inc. (NASDAQ: PYPL) is now a bargain stock. I think the answer is yes because PayPal is growing.
For example, PayPal’s quarterly revenues grew from $6.226 billion on 30 September 2021 to $6.846 billion on 30 September 2022. Moreover, Stockrow credits PayPal with seven straight quarters of revenue growth. For example, PayPal’s revenues grew by 20.26% in the quarter ending on 30 September 2021 and 9.96% in the quarter ending on 30 September 2022.
How Much Money is PayPal Making?
PayPal (NASDAQ: PYPL) is making a little more money. For instance, the quarterly operating income rose from $1.043 billion on 30 September 2021 to $1.118 billion on 30 September 2022. However, the quarterly income fell from $1.127 billion on 30 June 2021.
Similarly, PayPal’s quarterly gross profit rose from $2.890 billion on 30 September 2021 to $2.982 billion on 30 September 2022. However, the quarterly gross profit fell from $1.27 billion on 30 September 2021.
PayPal is generating more cash. For example, the quarterly operating cash flow will rise from $1.513 billion on 30 September 2021 to $1.948 billion on 30 September 2022.
PayPal is not keeping much cash. It reported a quarterly ending cash flow of $40 million on 30 September. Yet, PayPal can generate enormous amounts of cash. For example, there was a $17.843 billion quarterly ending cash flow on 31 March 2022. There was also a $1.381 billion quarterly investing cash flow on 30 September 2022. The quarterly investing cash flow rose from $326 million on 30 September 2021.
What Value does PayPal (PYPL) have?
I consider PayPal (PYPL) a value investment because it offers growing value. For example, PayPal’s total assets grew from $74.534 billion on 30 September 2021 to $765.435 billion on 30 September 2022. However, the Total Assets fell from $77.81 billion on 30 June 2022.
However, PayPal’s Cash and short-term investments fell from $13.292 billion on 30 September 2021 to $10.849 billion on 30 September 2022. Plus, PayPal’s total debt grew from $8.7 billion on 30 September 2021 to $10.241 billion on 30 September 2022. Thus, PayPal finished the past year with less cash and more debt.
Financial numbers show PayPal is a growing company that is adding revenue, assets and cash flow. Yet, it still has a shrinking stock price and less cash and income.
PayPal is a Growing Company
I think PayPal (PYPL) is an excellent investment because of its growing financial ecosystem.
For example, the number of PayPal accounts grew from 416 million in the second quarter of 2021 to 429 million in the second quarter of 2022, Statista estimates. Similarly, PayPal’s total payment volume grew from $310.99 billion in the second quarter of 2021 to $322.98 billion in the first quarter of 2022, GlobalData estimates. However, PayPal’s total payment volume hit $339.53 billion in the fourth quarter of 2021.
Adding to PayPal’s value is the Venmo peer-to-peer (P2P) money transfer app. The number of Venmo users in the US grew from 70.1 million in 2021 to 77.7 million in 2022, Oberlo estimates. Oberlo projects Venmo’s user base will grow to 85.1 million in 2023, 91.2 million in 2024, 97.1 million in 2025, and 102.3 million in 2026.
PayPal is a Widow’s and Orphan’s Stock
PayPal is popular in Europe and the United States. For instance, Moneyzine estimates 93% of German consumers used PayPal between August 2020 and August 2021. Similarly, 91% of British and Italian consumers, 90% of French consumers, 89% of Spanish, Mexican, and Canadian consumers used PayPal between August 2020 and August 2021, Moneyzine claims. Conversely, 83% of Americans used PayPal in the same period.
Thus, PayPal’s ecosystem is popular and growing fast. I think PayPal is now a major player in finance and FinTech. The challenge PayPal faces is to convert that status into cash and revenue as major banks, such as BNY Mellon (BK) do. If PayPal can generate that kind of money, it can become a Widow’s and Orphan’s Stock.