In this Market Foolery segment, host Mac Greer is joined by David Kretzmann of Supernova and Rule Breakers, and Matt Argersinger of Million Dollar Portfolio, to talk PayPal (NASDAQ:PYPL). Pretty much all the numbers in last week's report showed stellar growth for the digital payment ecosystem, which is only becoming more pervasive. So what's next? Is a buyout in the cards?
A full transcript follows the video.
This video was recorded on July 27, 2017.
Mac Greer: Guys, let's talk PayPal. Shares of PayPal up on better-than-expected earnings. Matt, PayPal has now beaten expectations every quarter since it was spun off from eBay back in 2015.
Matt Argersinger: Yeah. Me and Carl Icahn had a great idea a few years ago, when eBay and PayPal broke apart. I don't know if he was really the catalyst, but yeah, as a stand-alone public company, it's been outstanding. Revenue in the recent quarter up 18% to over $3 billion. But here's the number: They added 6.5 million new customer accounts. That's actually the fastest quarterly gain in over two years. So PayPal is a platform, like a lot of the platforms that we're seeing, that's actually seeing acceleration in adoption and growth. It's impressive. Payment transactions grew to $1.8 billion. That's a 23% gain. Total payment volume, $106 billion. First time it's crossed the $100 billion mark, that's the number of dollars flowing across PayPal's platform. That's incredible. That's up 23% as well. Venmo, the social payments platform, Facebook might have a lot to do with this -- $8 billion and transactions last quarter. That's up over 100% over the prior-year quarter.
This is really, now, PayPal is not just an easy way for anyone to pay someone online, pay a shop or a merchant online with a phone. This is a full-fledged digital payments ecosystem in so many ways. I think the network effect now is so strong, and the partnerships they've made with credit card companies, they actually just did a partnership with Baidu in China for their digital wallet as well. It's really getting everywhere, becoming more and more popular. So I almost think, it's a $70 billion company now -- I don't know if I see it as a stand-alone company much longer, to be honest with you. I actually think, and I said this over a year ago, I think Facebook should have bought PayPal. But I think this is a company, if you're Facebook or Amazon or Apple, it's not a big price to pay. Even if you're a J.P. Morgan or a MasterCard, this is a company that might want to be in your crosshairs. It wouldn't be too difficult to do an acquisition, even at today's market cap.
David Kretzmann: I haven't looked at PayPal as closely as you, Matt. But one thing I've always wondered is, if I have a PayPal account, but the main item I use to make payments is a Visa card, does PayPal actually get a cut of the transaction from Visa? Or are they basically saying, "We'll let Visa roll in here; we just want to be the platform."
Argersinger: It depends. I think there are situations where, yes, they do get a small cut. It just depends on the partnership agreement they specifically have with the credit card company. I don't know exactly. In a lot of cases, it's a matter of just, we want more people using PayPal, because that means they're probably using other services on PayPal, and we're fine with them using MasterCard or Visa. But in a lot of cases, no. If you're going directly through PayPal but you have a credit card stored, both parties are taking a cut of that transaction.