3. PayPal Holdings, Inc. (NASDAQ: PYPL)
Number of Hedge Fund Holders: 143
Digital payment giant PayPal Holdings, Inc. (NASDAQ: PYPL) is ranked third on the list of 10 best cash app stocks to invest in. The California-based fintech company operates payment solution providers, namely PayPal, Xoom, Venmo, and Hyperwallet, to name a few.
In the second quarter of 2021, PayPal Holdings, Inc. (NASDAQ: PYPL) reported an EPS of $1.15, an increase of 8% year over year and beating estimates by $0.03. The company’s second-quarter revenue grew 17% year over year to $6.24 billion. PayPal Holdings, Inc.’s (NASDAQ: PYPL) total payment volume reached $311 billion in the second quarter, with over 400 million active accounts. The stock has gained 35% in the last twelve months.
On July 29, Jefferies analyst Trevor Williams maintained a Buy rating on PayPal Holdings, Inc. (NASDAQ: PYPL) with a $350 price target. Despite missing Wall Street consensus estimates on guidance, the analyst believes PayPal was driven down mostly by eBay Inc. (NASDAQ: EBAY).
At the end of the first quarter of 2021, 143 hedge funds in the database of Insider Monkey held stakes worth $14.7 billion in PayPal Holdings, Inc. (NASDAQ: PYPL), down from 147 in the preceding quarter worth $15.9 billion.
Lakehouse Capital mentioned PayPal Holdings, Inc. (NASDAQ: PYPL) in its Q2 2021 investor letter:
“PayPal had a tremendous year as it was a significant beneficiary in the pull-forward in ecommerce. Total payment volume increased by 50% year-on-year through the first quarter of 2021 thanks to significant growth in users and merchants. The company now has 392 million active users, up 20.6% from March 2020, who use PayPal an average of 42 times a year. The significant growth in users and activity both look structural to us, not cyclical, and we doubt the six-million-plus merchants who began accepting PayPal in the past year will suddenly stop accepting one of the internet’s most widely used forms of payment.
PayPal is a prime example of how a widely followed business can still be chronically misunderstood. FactSet tracks 48 analysts who publish price targets on the stock, suggesting PayPal’s shares should be efficiently priced, and yet PayPal has beaten analysts’ average sales and earnings estimates in 18 of the 21 quarters since it was spun off from eBay. We suspect the market tends to underestimate the business’ inherent operating leverage and that the lifetime values of incremental new users continue to rise over time thanks to improving functionality and a growing merchant base that allows new users to spend PayPal more widely than did their predecessors.
We continue to think that PayPal has a considerable growth runway not only from gaining share of a large, growing market via its core platform but also from new tools and functionality including an enhanced instore experience, crypto offerings, Pay with Venmo, and buy now, pay later. The business isn’t sitting still despite its strong position and we look forward to what the future holds.”
