We are maintaining our "buy" rating on PayPal following the company's 1Q earnings report, which again demonstrated strong growth in payment volume and number of active accounts. The stock rose 37% in the first half of 2019.
Management continues to forecast mid- to high-teens revenue growth, even with a 3.5% headwind from the sale of the company's receivables portfolios to Synchrony (SYF). In October 2018, PayPal entered into partnerships with American Express (AXP) and Walmart (WMT).
The American Express partnership allows PayPal to access American Express tokens and enables integration with the American Express platform, including the ability to transfer and use American Express rewards points at PayPal merchants.
The partnership with Walmart enables PayPal to offer cash-in and cash-out money services at Walmart retail stores. PayPal Cash Mastercard customers can also use their PayPal balance to shop in store, on a mobile device and online at Walmart.
At its most recent Investor Day in May 2018, management said that the company had an addressable market of more than 3.6 billion internet users, and had the goal of serving 1 billion of these users on its platform.
The company sees significant growth potential from expanding financial services for underserved populations, including 'un-banked' Americans.
P ayPal, which was spun off from eBay (EBAY) in July 2015, is taking advantage of the changing payments landscape, and we believe that several trends favor the company's growth.
These include greater adoption of mobile devices for payments, and the technological integration of different payment types and channels. With 277 million active accounts, PayPal is a leader in innovative payment mechanisms and has strong brand recognition.
In our view, the company has several competitive advantages as it seeks to grow payment volumes. These include a strong international presence, with 100 million non-U.S. users in more than 200 countries. The company also provides merchants with end-to-end payment authorization and settlement capabilities, as well as instant access to funds.