4. PayPal Holdings Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 90
One of the Best Cash App Stocks, PayPal Holdings, Inc. (NASDAQ:PYPL), which specializes in online transactions, was split off from eBay in 2015. It provides businesses and people with electronic payment solutions. The company had 426 million active accounts by the end of 2023. The business is also the owner of the Venmo peer-to-peer payment network.
PayPal Holdings, Inc. (NASDAQ:PYPL) was able to establish and preserve a competitive edge by building a network of merchants and customers early in the development of e-commerce. In the past, the firm’s expansion has been pushed by the continuous transition to electronic payments and the emergence of e-commerce, which the coronavirus pandemic momentarily worsened. More recently, though, the company has faced significant challenges as the benefits of the pandemic have reversed and new competitors have emerged. In an effort to ease the strain on top-line growth, management has put more of an emphasis on cost reduction and product innovation, with the ultimate goal of moving toward more profitable growth.
The company’s revenue increased by 5.78% YoY in Q3 2024. PayPal Holdings, Inc. (NASDAQ:PYPL) showed steady growth and revenue, with revenue increasing 6% on a currency-neutral basis to $7.8 billion and total payment volume increasing 9% to $423 billion. Strong generation of free cash flow helped non-GAAP earnings per share jump 22% year over year. Innovative product launches were presented by the company, such as new mobile checkout experiences that increased conversion rates by up to 400 basis points for one-time checkout and 100 basis points for vaulted checkout. Furthermore, over one thousand retailers have embraced the Fastlane feature, which has improved customer experiences.
Venmo reported strong growth in Q3 of 2024, as evidenced by a 30% increase in monthly active debit card accounts and a 20% increase in monthly active Pay with Venmo customers. For the second consecutive quarter, Braintree recorded significant growth in transaction margin dollars, revealing its sustained excellent performance. The PayPal Everywhere campaign garnered great traction, with over 1 million new debit card users, indicating excellent adoption rates and the company’s expanding ecosystem.
Artisan Value Fund stated the following regarding PayPal Holdings, Inc. (NASDAQ:PYPL) in its Q3 2024 investor letter:
“Our top contributor was PayPal Holdings, Inc. (NASDAQ:PYPL), a financial technology company that enables digital and mobile payments between consumers and merchants. PayPal was a recent new purchase added to the portfolio in Q2. Better growth in payment volumes and transaction margins during PayPal’s latest quarter offered evidence that the new management team’s efforts are gaining traction. Notably, payment service provider Braintree returned to providing positive transaction margin, branded checkout contributed strongly to payment volume growth, and monetization at Venmo showed progress. Post-COVID, PayPal’s shares had been pressured by intensifying competition, the threat of which was seemingly exacerbated by prior management missteps. Shares traded for under 14X next year’s expected earnings at the time of our initial purchase. This was an attractive entry point to purchase a stake in a business with above-average—and improving—unit economics, a strong balance sheet and consistent free cash flow. Competent new management is already leaning on the company’s strong financial position to maximize the value of these assets.”
