Almost 25 years ago, Elon Musk and Peter Thiel transformed the world with their digital payments company PayPal (PYPL 2.15%). Today, the company remains the strongest competitor in a fast-moving industry and the cheapest, highest-quality tech stock you can buy in 2024.
The core of PayPal's business comes from merchants who accept PayPal as a payment method and customers who use PayPal to pay their bills.
For merchants, the main value of accepting PayPal is that it gives customers the flexibility to pay with credit/debit cards, Venmo, and even competing digital wallets. This reduces friction and makes transactions more likely (and therefore more likely) to occur.
The biggest benefit for customers is privacy and security. PayPal customers can buy something without sharing their financial information with the seller.
PayPal's simplicity and security has expanded brand awareness to people of all ages.
Stable annual revenue growth
Currently, PayPal has 391 million consumer accounts and 35 million merchant accounts, but its most important metric is total payment value (TPV), which will increase by 13% to 1.53 trillion in 2023. reached a billion dollars. It is the company's biggest driver of revenue.
Overall, PayPal's net revenue grew 8% in 2022 and 2023, and there's good reason to think it will continue to grow consistently above 8% every year for years to come.
Although the company is no longer the fast-expanding Silicon Valley startup it once was, 25 years later it still delivers solid revenue and payment volume growth, and there are three main reasons why this should continue: there is.
first mover advantage
First, PayPal's massive size gives it a moat in the competitive digital payments industry. The company is a pioneer and operates in 200 countries and territories around the world. For competitors to take market share, they need a much better value proposition than having someone deactivate their PayPal account.
The more customers use PayPal, the more merchants will accept PayPal as payment. This will continue to increase total payments for years to come.
Extensive reach
Second, PayPal is more than just a high-value, well-known global brand. The company also owns brands such as Venmo, Braintree, HyperWallet, and Xoom.
Venmo is one of the most popular digital payment apps. With more than 78 million users, primarily in the U.S., Venmo's revenue doubled from 2020 to 2022. Braintree helps merchants accept both PayPal and credit cards in a single integration. HyperWallet makes payments fast and easy around the world, and Xoom enables money transfers.
Every time someone makes a purchase using one of PayPal's brands, the company receives a portion of the amount. This is a lucrative business, especially when TPV is consistently rising like PayPal.
Government support moat
Finally, PayPal's moat extends beyond its size and well-known brands. This industry is highly regulated, making it very difficult for new competitors to enter. PayPal is allowed to operate through government licenses, and competitors simply cannot enter the industry without government approval.
The company holds a license as a money transmitter in the United States and a full BitLicense issued by the New York Department of Financial Services to provide virtual currency services in New York State. These licenses extend to other brands as well.
PayPal has a consistently growing business and a clear path to staying ahead of its competitors, but it hasn't yet reached the biggest reason I'm bullish…
Cheapest and highest quality tech stocks right now
PayPal is a high-tech stock in the digital payments space, but its valuation is close to cheap.
When I'm writing it's Price to sales ratio (P/S) is only 2.16. This means that the investor is paying $2.16 for every $1 of the company's sales.
P/S for June 2021 is almost 15! The stock is cheap compared to its historical average and also cheap compared to its competitors.
global payments is a digital payment company; S&P500 Its current P/S is 3.52, making it about 63% more expensive than PayPal.
blockOwns CashApp and Square has a P/S of 2.29, just slightly ahead of PayPal.
buy and hold
PayPal's popularity has made it one of the most well-known brands in the world among nearly every demographic, and its size and scale are driving its next growth evolution.
The new era of cryptocurrencies has made digital payment software even more important, and PayPal is perfectly positioned to take advantage of this.
The company's stock has a P/S of 2.16, making it the cheapest and highest quality tech company on the market today. PayPal probably won't trade at a discount for long, as its Venmo subsidiary and its government license ensure steady growth over the years.
This is the type of stock you can buy and hold for years.
