Pros and Cons of Investing in PayPal
PayPal Holdings Incorporation is a company based in the United States. The company offers digital payment solutions to individuals and companies around the world. The company makes the most of its money through transaction fees (charged to merchants) as well as other interest and fees earned from loans and other services. It operates PayPal, Venmo, and some others. The company was founded in 1998.
- PayPal is a great reopening play in an investor’s portfolio. The company saw a drop in demand for some transactional services as people stopped travelling and making non-essential purchases. However, once the pandemic is over, the company will continue to see rising payment volumes and demand for digital payment solutions.
- PayPal is also a great growth play in an investor’s portfolio. There is no doubt that the entire world is starting to shift from cash to digital payment systems. PayPal is at the forefront of the digital payments industry, something that will help the company grow its business in the future. Other ventures into cryptocurrency could further drive the stock price higher.
- Digital payments are extremely popular with millennials and younger consumers who do now want to use cash but would rather use digital payment options like PayPal. Younger consumers will drive future growth and other opportunities for the company. This will benefit investors in the company as well.
- PayPal has ventured and invested heavily in the cryptocurrency space. PayPal allows users in the United States to buy and sell cryptocurrency like BitCoin and will also allow its customers to pay using cryptocurrency on the company’s platform. I have a neutral stance on cryptocurrencies at the moment, but I do believe that it has a chance to offer promising growth opportunities.
- PayPal, like other digital payment businesses, are extremely profitable. I have listed some of the many ways that the company makes money in the Overview part of this post. This has helped the company grow its profit margins in the past and will continue to help the company grow these numbers in the future. A higher profit margin will also benefit investors in the company.
- The company has been reporting rising revenues and profits over the past couple of financial years due to the reasons mentioned above. This has helped the company grow its business, expand its product offerings, and aquire companies. This has also benefited investors in the company. In the financial year of 2020, the company reported revenues of around 21.45 billion and profits of around 4.2 billion. Both of these metrics are higher than what the company reported in the financial year of 2019 when they had revenues of around 17.77 billion and profits of around 2.46 billion.
- PayPal faces tough competition in the digital payments industry. Some of these competiors include Visa, MasterCard, Discovery, Google, Apple, Square, and many others. This competition might hurt the company and its investors in the future.
I think that PayPal is a great long-term investment due to its positon as a good reopening play, a solid growth play, its rising popularity with millennials, cryptocurrency, a profitablue business model, as well as rising revenues and profits. However, tough competition might hurt the company and its investors in the future.