- Bullish on PayPal with a price target of $45.
- PayPal One Touch enables instant, password-less transactions.
- Q3 2015, Venmo generated $2.1 billion in transactions, which is a 200% year-over-year gain.
Paypal Holdings (NASDAQ:PYPL), the digital and mobile payments platform, is engineered for success in 2016 and beyond, and probably not for all the reasons given lately by bullish analysts or by PayPal CEO Dan Schulman. PayPal’s fundamentals are strong, and they are in prime position to capitalize on the apex of what is a digital banking revolution.
You should know PayPal split from eBay in July, which came just before a down market that sent PayPal stock all the way down to $30 in mid-September, but it has since been back on a 17% bullish tear. That volatility was expected though, and PayPal’s growth as its own holding is dependable. According to CEO Dan Schulman, eBay is growing at 1.5 – 2 times the year-over-year overall ecommerce rate.
As the world grows in mobile and digital vitality, we will see PayPal, the favored form of commerce for millennials, grow and grow.
I’m currently 24 years old - when I was in high school I made a PayPal account, and it was a relatively new platform then, mobile payments might not have even existed yet, but PayPal has continued to serve as my primary online payment method, as well as one of my main sources of receiving income in my formative years of self-employment. With a user base of over 173 million users and 13 million merchants, PayPal is a company with over 15 years of experience with serving merchants and consumers alike as one of the first ever digital payment methods, which is what gives PayPal its reputation for being safe and secure to use.
Currently trading at $34.79, PayPal stock deserves a bullish price target of about $45, because of its stability in its market and ability for further market penetration. As the world moves toward mobile, we are going to see PayPal continue to rise as the primary form of online commercial transactions. This Black Friday, December 1st, was the first time we saw more people shop online than in brick-and-mortar stores, and it was no fluke – reports from many ecommerce companies are stating similar statistics regarding mobile and online commerce. PayPal CEO Dan Schulman states, “This year was a turning point where mobile is really becoming the way that people start to shop.”
PayPal employs 17,000 employees. Over 8,000 of those employees are in customer service, which has been a largely positive contribution to establishing user confidence and reliance in PayPal as a trustworthy service. Last quarter, PayPal’s revenue on an FX-neutral basis grew 19%.
PayPal acquired mobile payments company Braintree in 2013 for $800 million cash, and Paydiant in April of 2015 for $280 million; adding to its arsenal of payment solutions like PayPal Credit, and Venmo. Venmo is a hot topic for PayPal – a free digital wallet that gives you the ability to pay back instantly a friend or family member.
My problem with Venmo isn’t its efficacy; in fact, in 3Q 2015, Venmo generated $2.1 billion in transactions, which is a 200% year-over-year gain. I just don’t believe Venmo touts the potential as an mWallet service to compete with the likes of Apple Pay, Google Wallet, and all the others throwing their hat in the ring, Samsung and Android included. I know I would rather use the PayPal service from its app than to begin to use Venmo with merchants and retailers in-store. Venmo is a fantastic social app that allows you to conveniently share money with friends and family, but I don’t foresee its efficacy affecting PayPal in a positive or negative slight.
For this reason I don’t consider PayPal’s efforts toward expansion with Venmo as a setback or wasted effort. This is a good time to be competing in the mobile wallet environment, but it isn’t going to be easy; therefore, PayPal’s growth is best valuated long-term and for its other endeavors.
The OneTouch system PayPal has been working to establish will allow PayPal’s algorithms to detect when it is in fact you using your account and wishing to purchase something, bypassing the need to enter your PayPal login information and password every time you want to buy something from your mobile phone. Your phone and PayPal app will be able to instantly recognize your account without the need for a password, giving you a one-touch option for making purchases. This is an effort we’ve seen PayPal improve upon over the years and I expect this to be a strong component to PayPal’s success in 2016 and beyond.
PayPal has generated 5 billion total transactions this year. PayPal’s 52-week high is $42.55 and its low is $30 - my price target for PayPal stock is $45.