World's Most Popular Finance App of 2022 Could Be a Puzzle to Many
PayPal's stock has taken a significant hit, with a 70% drop from its high, but this downturn might be a blessing in disguise for buy-and-hold investors. Despite the dip, PayPal remains a dominant player in the digital payments industry.
At the end of Q1 2022, PayPal boasted an impressive 429 million active accounts. The company's global reach is vast, with a strong presence in key markets like Germany, Brazil, Mexico, and across Europe. In contrast, Cash App, owned by Block, is primarily a US-focused platform, limiting its global download numbers relative to PayPal's total international presence.
Mobile wallet adoption worldwide is high, with digital wallets like PayPal capturing the majority of online digital transactions. PayPal's global reach taps into this larger ecosystem beyond North America, including large markets in Europe and Latin America. Cash App, while highly popular in the US, has limited penetration outside the country.
PayPal's FCF margin was 16% in Q1, with an expected $5 billion in FCF for 2022. The company's management has a history of acquiring other companies and repurchasing shares to increase shareholder value. In the coming year, they are expected to accelerate share repurchases, which could deliver a boost to intrinsic shareholder value for buy-and-hold investors.
PayPal's Q1 trailing-12-month transactions per active account hit an all-time high of 47, indicating a thriving user base. The company is currently the most-downloaded fintech app in the world, with 49 million downloads in the first half of 2022. Despite lowering its active account guidance, PayPal is still projected to add 10 million net new accounts for 2022.
Cash App, while in fourth place with 35 million global downloads, is not a global app, with nearly all downloads coming from U.S. users. Block, Cash App's parent company, plans to expand internationally soon, which could narrow the download gap between the two apps.
Despite these challenges, the author believes PayPal is still a good stock to buy. The stock currently trades at its cheapest valuation ever, with a P/S ratio of just 3.7. With PayPal's strong financials, global reach, and management's strategic repurchases, it presents an attractive opportunity for long-term investors.
[1] Source: https://www.statista.com/statistics/1113858/cash-app-downloads-worldwide/ [2] Source: https://www.statista.com/statistics/1113859/paypal-downloads-worldwide/ [3] Source: https://www.statista.com/statistics/1113860/paypal-market-penetration-rate-worldwide/ [4] Source: https://www.statista.com/statistics/1113863/paypal-venmo-downloads-worldwide/
- The dip in PayPal's stock price might be advantageous for buy-and-hold investors, as the company's strong financials, global reach, and strategic repurchases present an attractive opportunity for long-term investments in the finance sector.
- In the tech-driven world of business, PayPal continues to dominate the digital payments industry, capturing the majority of online digital transactions, with a global presence that outreaches even widely used apps like Cash App.
- As the digital wallet market continues to grow, particularly in regions like Europe and Latin America, investing in a diverse portfolio that includes PayPal could prove lucrative, given its extensive international reach and strong financial performance, as evidenced by its impressive FCF margin and projected FCF for 2022.
