Shares of PayPal Holdings have soared ahead of Wednesday, July 25, earnings–and the move is actually on some news.
Today, for example, peer to peer payment competitor Snapcash announced that it would shut down. That’s one less competitor in a brutally competitive market.
And hedge fund Third Point disclosed that it had taken a stake in PayPal. The fund, run by Dan Loeb, said the PayPal stock could reach $125 a share within 18 months. In an investor letter obtained by Bloomberg, Third Point said, “We see parallels between PayPal and other best‐in‐class internet platforms like Netflix and Amazon: High and rising market share, untapped pricing power, and significant margin expansion potential.” PayPal’s Venmo payments platform could contribute $1 billion in revenue within three years, Third Point continued.
PayPal closed up 2.02% today to $89.24 and the shares are now up better than 10% since June 27. The stock has gained 113.14% since I added it to my long-term 50 Stocks Portfolio on February 15, 2017.
On Wednesday Wall Street is expecting the company to report earnings of 56 cents a share–essentially flat with the 57 cents PayPal reported for the March quarter–on $3.81 billion in revenue. (That would be up from $3.69 billion in the March quarter. Last quarter PayPal saw a 3 cents a share earrings surprise.)
Me? I’m looking for more information on PayPal’s drive to acquire market share and technology in order to hold off actual or potential competitors that include Amazon (AMZN) and Square (SQ). For example, in May PayPal announce that it would acquire Swedish small-business platform iZettle for $2.2 billion to help expand in Europe and Latin America and compete with Square. The iZettle deal also pushes PayPal further into the market for in-store and offline payments. That’s a bigger market with higher margins than in PayPal’s historic core market of online commerce. In the last year PayPal has acquired Swift Financial, Jetlore, Hyperwallet, and Simility. Some of these acquisitions, Jetlore in particular, add to PayPal’s capabilities in artificial intelligence. AI is a key in this market because it allows PalPay to do deeper analytics of customers for its payment partners–and that embeds PalPay more deeply into the workings of those payment partners.
