Under the terms of the agreement, KKR's private credit funds and accounts will acquire substantially all the European BNPL loan portfolio held on PayPal's balance sheet at the close of the transaction and will also acquire future originations of eligible BNPL loans. (NASDAQ: PYPL) and KKR, a leading global investment firm, today announced the signing of an exclusive multi-year agreement for a €3 billion replenishing loan commitment under which private credit funds and accounts managed by KKR will purchase up to €40 billion of buy now, pay later (BNPL) loan receivables originated by PayPal in France, Germany, Italy, Spain, and the United Kingdom. and NEW YORK, J/PRNewswire/ - PayPal Holdings, Inc. PayPal expects to allocate approximately $1 billion to incremental share repurchases this year updated outlook from approximately $4 billion to approximately $5 billion in total share repurchases in 2023 While PayPal's growth has slowed considerably, and it faces intense competition, I think the attractive valuation being offered for what is still a competitively advantaged business makes the stock worthy of being a buy today.KKR to purchase up to €40 billion of eligible current and future PayPal Pay Later loans originated in Europe And with the leadership team finding ways to cut substantial costs across the board, the company is set to become even more efficient in the future. The balance sheet is in pristine condition, with a net cash position of $4.4 billion. In 2022, PayPal generated $5.1 billion of free cash flow on $27.5 billion of revenue, a superb margin of 19%. Network effects can also help to explain why the business is so lucrative. It gives PayPal a powerful competitive position that's almost impossible for a smaller rival to catch up to. The opposite, where more individuals increase the usefulness for merchants, is also true. That just means that as PayPal brings on more merchants, consumers find more value in using the service. PayPal's two-sided platform, consisting of 35 million merchants and 398 million individuals, has allowed the company to benefit from network effects, probably the strongest economic moat there is. This remains a key strategic focus for CEO Dan Schulman. In the latest quarter, transactions per active account were up 13%. The business is doing a great job at getting more engagement from its user base. With Wall Street consensus analyst estimates forecasting annualized net income growth of 28% between 20, the potential for good returns is in the cards, especially keeping the valuation in mind. That tells me investors have gone from being extremely optimistic about this business to striking a pessimistic tone. That's well below the trailing five-year average P/E ratio of 55. This is also a threat when it comes to in-person transactions.Īnd with Venmo, the PayPal-owned popular peer-to-peer service that counts 60 million monthly active users, the company has to compete with Zelle, operated by a consortium of big banking institutions, as well as with Block 's Cash App.īecause the stock has been crushed over the past few years, it trades at a price-to-earnings (P/E) multiple of 27 right now. Its usage soared during the key holiday shopping season. When it comes to online checkout, which is PayPal's core feature, Apple Pay is starting to make inroads. Consumers are stretching their budgets and paying more for the essentials, which results in lower amounts of discretionary spending power.Īnd although the payments industry produces some of the best businesses in the world - think Visa and Mastercard - the competition for a company like PayPal is stiff. Moreover, inflationary pressures are a serious headwind for PayPal. Because PayPal is the most widely accepted digital wallet in North America and Europe, this trend hurts the business. Top e-commerce companies, including Etsy and even Amazon, have reported sales slowdowns in recent quarters, a sign that consumers could be favoring in-person retailing once again. While online shopping was booming when everyone was stuck at home, things are returning back to normal. Does that mean the platform has reached its full potential? And in the first three months of this year, PayPal's user base shrank slightly from December of last year. The business increased revenue 8.5% in 2022, while adding just 8.6 million net new active accounts, a far cry from the previous two years. What's strikingly clear is that the monster growth we saw PayPal post in 20 might never be achieved again.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |