Put PayPal at the Top of your Buy List

11/01/2019 5:00 am EST

Focus: FINANCIALS

Todd Shaver

Founder and Editor-in-Chief, BullMarket.com

PayPal Holdings (PYPL) is one of our biggest 3Q19 winners so far, up 10% after beating estimates across the board, observes Todd Shaver, growth stock expert and editor of Bull Market Report.

The company reported net income of $462 million, or $0.39 a share, up from $436 million, or $0.36 a share, in the year-prior quarter. After adjusting for stock-based compensation and other expenses, earnings rose to $0.61 a share from $0.58 a year earlier.

This year’s figure included a $0.15 negative "benefit" from unrealized losses on strategic investments. Analysts had been modeling $0.52 a share in adjusted earnings.

PayPal’s revenue for the third quarter climbed to $4.4 billion from $3.7 billion in the year-ago quarter, whereas analysts were expecting $4.35 billion.

Total payment volume (TPV) increased to $180 billion from $145 billion and came in ahead of estimates of $177 billion. Venmo — a mobile payment service owned by eBay — processed $27 billion in volume, on pace to hit $100 billion this year. $100 billion!

The company processed more than 1 billion transactions per month over a quarter, the first time ever that it had hit this number. The company added 10 million net new active accounts in the third quarter hitting the 280 million mark.

If you’re worried about eBay (EBAY) leaving the company, don’t be. eBay volume represented just 8% of total TPV in the period and is projected to reach just 6% when the agreement ends.

The agreement between eBay and PayPal will officially end in 2020. eBay will begin the transition in the second half of this year and hopes most of its customers will be using global payment business Adyen by 2021. But shoppers will have an option to use the off-platform PayPal as a payment option until 2023.

PayPal invested $750 million earlier this year in Mercadolibre (MELI), an Argentina-based e-commerce marketplace with 250 million registered users in 19 countries, more than eBay’s 180 million. The company expects the investment to pay off in growth in Latin America.

The company issued its full-year revenue outlook to $17.7 billion. It did $9.2 billion in 2015, $10.8 billion in 2016, $13.1 billion in 2017, $15.5 billion in 2018. When they hit $17.7 this year, what do you think they will hit in 2020? $20 billion? You can count on something big.

In fact, we think that PayPal is one of the greatest investments one can make today. Our subscribers are always asking us what stock we like the best or what stock is going to be a home run in the next 5-10 years. Let us tell you here and now — PayPal is one of them and we would put it at the very, very top of our list.

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