This is a step-by-step stock review to answer the question, is PayPal (PYPL) stock a good buy?
This article will teach you how to use the 4Ms of investing. This will be a detailed walkthrough to show you how the 4Ms work and why they are important. If you are interested, you can log into Tykr to use the 4M Confidence Booster (Powered by OpenAI) which will allow you to complete a 4M Analysis in less than 60 seconds.
What are the 4Ms?
- MOS (Margin of Safety) – The MOS is the math part of investing which includes the Summary, Score, and MOS (Margin of Safety).
- Meaning – The meaning is the business model and how scalable the revenue streams are.
- Moat – The moat is how the business compares to other companies in the same Sector and Industry.
- Management – The management is the track record of the CEO.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
Table of Contents
1. PayPal Company History
When investing in stocks, it’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.
- Company Founding:
- PayPal was founded in December 1998 as Confinity by Max Levchin, Peter Thiel, and Luke Nosek.
- Early Focus:
- Initially, it developed security software for handheld devices.
- Merger:
- In March 2000, Confinity merged with X.com, an online banking company founded by Elon Musk.
- Name Change:
- In 2001, the company was renamed PayPal.
- Growth:
- PayPal grew rapidly as an online payment platform, becoming widely used on eBay.
- Acquisition by eBay:
- In October 2002, eBay acquired PayPal for $1.5 billion.
- Expansion:
- PayPal expanded its services beyond eBay, becoming a leading online payment solution for businesses and individuals.
- Independence:
- In 2015, PayPal became an independent company again after spinning off from eBay.
- Innovation:
- Over the years, PayPal introduced various features like PayPal Here for mobile payments and One Touch for faster checkout.
- Global Reach:
- Today, PayPal operates in over 200 markets worldwide, processing billions of dollars in transactions annually.
- Diversification:
- It has expanded its services to include peer-to-peer payments, digital wallet, and merchant services, catering to diverse financial needs.
- Continued Evolution:
- PayPal remains at the forefront of digital payments, continually innovating to meet the evolving demands of consumers and businesses alike.
2. MOS (Margin of Safety)
When investing in a company, the first step is to look at the financials. Fortunately, Tykr does this for us automatically. The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make.
- Summary: On sale
- Score: 56/100
- MOS: 80%
To see the most up-to-date Summary, Score, and MOS, please log into Tykr.
3. Meaning
When investing in a company, it’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.
Here is how PayPal (PYPL) makes money:
- Transaction Fees: Charges for processing transactions on personal and business accounts.
- Cross-Border Fees: Additional charges for currency conversion or international transfers.
- Merchant Services: Fees for services like PayPal Checkout and PayPal Payments Pro for businesses.
- Interest Income: Earns interest by investing users’ funds in short-term securities.
- Loan Interest: Makes money from interest on loans like PayPal Credit.
- Subscription Fees: Charges for premium services such as PayPal Business.
- Venmo Fees: Revenue from fees on Venmo transactions like instant transfers and card payments.
- Marketplace Services: Fees for processing payments on online marketplaces like eBay.
- Financial Services: Revenue from services like investing and wealth management.
- Partnerships: Collaborations with banks, retailers, and others, resulting in revenue through agreements or referral fees.
Here are a few of the other companies that PayPal (PYPL) has acquired over the years. This is important because a company will use a “Buy before build” philosophy to go to market faster and add additional streams of revenue. A company with more revenue streams has a more stable business model. Keep in mind, that most companies don’t build new software because it takes too long to go to market and generate revenue.
- Xoom Corporation
- Braintree
- Venmo
- Hyperwallet Systems Inc.
- iZettle
- Honey Science Corporation
- Simility Inc.
- TIO Networks
- Paydiant
- Swift Financial
4. Moat
When investing in a company, it’s important to understand how a company ranks against other companies in the same sector and industry. Based on the Score, here is how PayPal (PYPL) stacks up against other companies.
- Mastercard – 89/100
- American Express – 83/100
- Visa – 72/100
- Atlanticus Holdings Corporation – 61/100
- PayPal – 56/100
- Adyen – 50/100
To see the most up-to-date Summary, Score, and MOS and each stock, please log into Tykr.
5. Management
When investing in a company, it’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. Good leaders typically have stronger cultures, less turnover, and better returns in the stock market.
- Strategic Partnerships:
- Alex Chriss played a key role in forging strategic partnerships with major companies like Google, Facebook, and Apple, expanding PayPal’s reach and integration into popular platforms and services.
- Product Innovation:
- Under his leadership, PayPal introduced innovative products and features such as One Touch checkout and PayPal Credit, enhancing user experience and driving growth.
- Mobile Payments:
- Chriss spearheaded PayPal’s efforts in the mobile payments space, leading to the development of mobile-friendly solutions and the acquisition of companies like Braintree and Venmo, positioning PayPal as a leader in the mobile payment ecosystem.
- International Expansion:
- He focused on expanding PayPal’s presence globally, facilitating cross-border transactions and establishing partnerships with international merchants and financial institutions.
- Customer-Centric Approach:
- Chriss emphasized a customer-centric approach, driving initiatives to improve customer satisfaction, trust, and loyalty through enhanced security measures, transparent policies, and responsive customer support.
- Financial Inclusion:
- He championed initiatives to promote financial inclusion, empowering underserved communities and small businesses by providing access to digital payment solutions and financial services.
- Revenue Growth:
- Chriss contributed to PayPal’s consistent revenue growth through strategic acquisitions, product innovation, and expanding market share in various segments of the payments industry.
- Corporate Culture:
- He played a role in shaping PayPal’s corporate culture, fostering a culture of innovation, collaboration, and diversity, attracting top talent and driving employee engagement and retention.
6. 4M Score
All of our homework on this company leads up to the 4M Score. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the Meaning, Moat, and Management. If all 4Ms pass, we should have high confidence in buying this stock.
What 4M score are we going for?
- 80-100 = High confidence – Yay! You should have high confidence buying this stock. It passes all 4M!
- 60-79 = Moderate confidence – Alert! There may be better stocks in the market. Only buy this stock if you truly believe the company will improve!
- 0-59 = Low confidence – Warning! There are better stocks in the market. Due to the low score, you should consider looking at other stocks.
👉 The 4M Score of PayPal (PYPL) is 64/100.
To see the most up-to-date 4M Score, please log into Tykr.
7. Is PayPal (PYPL) stock a good buy?
Some of the top questions investors can have is PayPal (PYPL) stock a good buy or should I buy PayPal (PYPL) stock?
Investing in PayPal presents a compelling opportunity due to several factors:
- Market Leadership: PayPal is a dominant force in the digital payments industry, boasting a vast user base and widespread acceptance globally, which offers stability and growth potential for investors.
- Diversified Revenue Streams: The company generates revenue from various sources including transaction fees, merchant services, and interest income, providing resilience against market fluctuations.
- Innovation: PayPal continually innovates to stay ahead of the curve, introducing new products and features that cater to evolving consumer and business needs in the digital economy.
- Global Reach: With operations in over 200 markets worldwide, PayPal has significant opportunities for expansion in emerging markets, driving future growth prospects.
- Financial Performance: PayPal has a history of strong financial performance, with consistent revenue growth and profitability, which can translate into attractive returns for investors.
However, it’s essential to consider potential risks such as increasing competition in the digital payments industry, regulatory challenges, and cybersecurity threats. Conducting thorough research and analysis of PayPal’s fundamentals, competitive positioning, and growth prospects is crucial before making any investment decisions.
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To truly know if PayPal (PYPL) is a good stock to buy or sell, we recommend you log into Tykr. Within seconds you can see the Summary, Score, MOS, and 4M Score.
If you found this stock review interesting, you may also like this review on Paycom.