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PayPal Holdings Inc (NASDAQ:PYPL) had a very good year in 2017, climbing close to a 90% gain. But the reality is, 2017 is just a taste of what’s to come for PYPL stock in 2018 and beyond.
PayPal is finally stretching its wings after leaving eBay Inc’s (NASDAQ:EBAY) nest.
If you recall, in September 2014, EBAY announced that it was spinning off its digital payments division.
The goal was to allow PYPL to grow into the expanding digital payments space and detach it from its EBAY’s slower growing retail/discount model.
PYPL was built by a visionary team that included Elon Musk, Max Levchin and Peter Theil.
It was known as the PayPal Mafia a few years ago, and they were some of the richest and most powerful men in Silicon Valley.
While its union with EBAY was certainly helpful to the innovative auction and retail site, the visionaries that built PYPL had something much bigger in mind.
But like many great tech ideas, sometimes it’s necessary to wait until reality catches up. Social media has this challenge, as did artificial intelligence and mobile computing.
Now it’s financial systems’ turn.
When the spinoff was announced, PYPL had 152 million registered users with revenue around $7.2 billion. Today, it has 281 million users with revenue running around $13 billion annually.
The Real Strength Behind PYPL Stock
But the most exciting news is the launch of PayPal’s Venmo peer-to-peer payment solution. It was up 93% in Q3 to $9.4 billion. If you’re not familiar with Venmo, it’s becoming one of the most popular ways to send money to almost anyone and it’s a big deal for PYPL stock.
It’s a peer-to-peer service, meaning if you need to send your friend some money for a concert ticket they bought you, you can do it on the Venmo app directly. No need to write a check or go through a bank interface.
What’s more, PYPL’s payment system isn’t platform dependent. It works with Android, iOS and isn’t linked to larger banks. That means you don’t have to have a certain phone or an account with a certain financial institution to make it work.
This is huge for PYPL stock, as digital payments become the new revolution in banking for millennials and Gen Zs.
And the most encouraging news from PYPL is, it sees this opportunity. Recently it sold off its credit business to Synchrony Financial (NYSE: SYF), which freed up about $6 billion it held in its loan portfolio.
Now PayPal can focus on broadening its digital payments business. And this has investors very excited. Currently, PYPL stock is trading at price-to-earnings ratio of 58 with a nearly $90 billion market cap.
Bear in mind, this P/E reflects a 90% move in the stock without Q4 holiday numbers, so it isn’t as expensive as it may seem. Also, given its current trajectory, PYPL stock is just starting a long path to growth domestically and internationally.
— Louis Navellier