Should You Own PayPal (PYPL)?

[View in browser]( [The Spill Logo] BROUGHT TO YOU BY: [Logo]( Proprietary Data Insights Financial Pros’ Top Payment Processing Stock Searches in the Last Month Rank Ticker Name Searches #1 [PYPL]( Paypal 32 #2 [COF]( Capital One Financial 13 #3 [DFS]( Discover Financial Services 2 #4 [MA]( Mastercard 1 #5 [V]( Visa 1 #ad [Making Sense Of Your Money With The Juice]( Brought to you by [Porter Stansberry]( [Will this strange discovery decide the 2024 election?]( [Porter Stansberry - Will this strange discovery decide the 2024 election?]( Energy is life… And this year, it could also decide the 2024 election. Hidden in America's forgotten towns, a groundbreaking energy discovery is emerging. And it could shape the next four years of American life more than the border, tax cuts or gender politics. This urgent new documentary reveals how this new tech could solve America’s energy crisis, with details on the one company with a virtual monopoly on it. [Click here to get all the details.]( Is PayPal (PYPL) More Than a Value Trap? PayPal (PYPL) revolutionized online payments when it launched in 1998, becoming a household name in digital transactions. The company's platform enabled secure and convenient money transfers, purchases, and merchant services for millions of users worldwide. Yet, a lack of strategic direction allowed the company to become complacent, failing to retain its customers as competitors emerged. So, it was noticeable when things finally started to turn around for the company. Financial pros started looking at this stock more than all other payment processors combined, according to our TrackStar data. Active accounts dropped 1.4% in Q2 YoY. But they were up QoQ for the third quarter in a row. By most valuation measures, the company is extremely cheap. But is it more than just a value trap? PayPal’s Business From eBay purchases to splitting dinner tabs, PayPal's tentacles reach into 200 markets globally. Its arsenal includes peer-to-peer payments, merchant tools, and even buy-now-pay-later options. The company's 429 million active accounts speak to its widespread adoption, which has given it 40.5% of the total payment services market, including Venmo, which they’ve owned since 2013. PayPal segments its business into the following areas: - Transaction revenues (91% of total revenues) - Fees charged to merchants and consumers for payment processing, currency conversions, and other transaction-based services. - Revenues from other value-added services (9% of total revenues) - Income from partnerships, referral fees, subscription services, and interest on loans and customer balances. In its latest quarter, PayPal reported an 8% increase in revenue to $7.9 billion, driven by growth in total payment volume and transaction revenues. The company is actively expanding its offerings, recently announcing the general availability of its Fastlane checkout solution in the U.S. and deepening partnerships with major platforms like Meta and DoorDash. Management hopes innovations in areas such as cryptocurrency integration, buy-now-pay-later services, and in-store payment options will help the company regain its competitive edge. Financials [Financials] Source: Stock Analysis At first glance, things don’t look so bad for PayPal. Revenues appear to be consistently growing while margins, although down in some areas, are still pretty solid. However, much of the revenue growth has come from higher volumes per transaction, not necessarily more customers. If anything, it’s a sign of inflation, not necessarily more spending. Yet, there’s no denying the company is attractive, generating $7.3 billion in cash from operations in the trailing 12-month period with very little CAPEX and total debt of $13 billion. Unsurprisingly, management has spent $5.3 billion on share buybacks in the past year, a healthy 7.2% yield. Valuation [Valuation] Source: Seeking Alpha Because of its exceptional cash generation and profitability, PayPal trades at just 10x operational cash flow. While that’s not as cheap as Capital One Financial (COF) or Discover Financial Services (DFS), PayPal isn’t burdened with holding customer loan balances like they are. Compared to pure payment processors like Visa (V) and Mastercard (MA), PayPal looks like a steal. Growth [Growth] Source: Seeking Alpha On the surface, PayPal’s growth metrics look great. However, when you look at the EPS and net income growth over the last few years, you find a wide gap between them and other payment processors. That’s where you start to see the divergence. Profitability [Profits] Source: Seeking Alpha Those divergences get even wider when you look at PayPal’s profitability. To be fair, it doesn’t operate in the same way as Mastercard or Visa. But if it’s unable to achieve better overall profits, why bother? [Brace for a new dawn in U.S. stocks]( CNBC's Jim Cramer once said: "I learned a long time ago not to be on the other side of a Chaikin trade." Since Chaikin accurately predicted the 2012 Priceline collapse, the 2020 crash, and the 2022 bear market, over 1 million people have chosen to follow his Wall Street warnings. Today he's stepping forward with a new warning – one he's never shared with the hedge funds, banks, and brokerages he worked with over 50 years on Wall Street. [Click here to access his new warning, and #1 stock recommendation.]([Ad] Our Opinion 6/10 This is a tough one for us. We don’t see any real growth catalysts for the stock. However, management has committed to essentially shoveling cash generated into share buybacks. That would be done in less than a decade at the current share price. And there’s nothing materially wrong with their business. So, in a first for us, we’d call this a toss-up. 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