Did you receive your third round of stimulus money but don't need it for basic expenses? Saving it and investing for later is a smart move. If you have at least a few years to wait (the more, the better), you could compound your stimulus check and have much more wealth later on.
PayPal: The future of banking is in an app
Were you one of the millions who used PayPal or Venmo to receive a direct deposit from the federal government or to cash a government stimulus check? If so, you might want to reward your digital banking use by scooping up some shares of PayPal.
PayPal is a digital payments and financial services powerhouse. The company reported an astonishing 73 million net new active accounts in 2020, ending the year with 29 million merchants and 350 million individual consumers using one of its services. But even as effects of the pandemic gradually ease up in the next year, PayPal doesn't foresee much in the way of a slowdown. It forecasts picking up another 50 million net new active accounts in 2021.
How is PayPal acquiring so many users? This is far more than a simple digital wallet or digital payments option these days. The Venmo credit card is now available to all of its 70 million and counting app users. The apps allow for buying and selling of cryptocurrencies. Venmo and PayPal QR codes allow for new in-store purchases at supporting merchants. And new features will be rolled out this year to help users with saving and budgeting, e-commerce functionality (pulled from its Honey Science acquisition in 2019), flexible buy-now pay-later terms for consumers, and check cashing and bill payment options for businesses.
Simply put, PayPal has turned itself into a financial services firm for a new digital era. However, the average user transacts with PayPal only about 40 times a year, so there's plenty of room for the company to deepen its relationship with customers. After a more than 20% tumble from their all-time highs, shares trade for 56 times trailing 12-month free cash flow. Given how quickly PayPal is growing (especially its bottom line), shares look like a reasonable deal for the long haul.
Disney: Vacations, movies, sports... finally!
Planning on using some of your stimulus money for a vacation later this year? Save a little of it and treat yourself to some Disney stock, too. Shares are up 28% since the start of 2020, mostly because of the incredible performance of its new streaming TV service, Disney+. But the stock could fly higher as the company's non-digital businesses rebound.
Shut down for a year, Disneyland in California will be reopening with limited capacity on April 30. And if novel coronavirus infections continue to trend down, maybe capacity can increase at the other Disney theme parks around the globe. Once Disney's marquee business, the parks and experiences segment could be in for a big rally in 2021.
If movie theaters get their way, box office sales could also come roaring back from a yearlong dormancy. But even if consumers opt not to go back to their local cineplex, Disney has a plan for that, too. It's been experimenting with premium access to new films on Disney+, with Mulan last year and Raya and the Last Dragon more recently, to enough success that it says the next installment in the Marvel Cinematic Universe, Black Widow, will simultaneously stream on Disney+ along with a theatrical release this July.
And of course, sports are back, which will help Disney's broadcasting and cable segment -- the segment that bailed Disney out last year and helped it eke out a small profit during fiscal 2020. Most sporting venues are open to only limited capacity, but with events such as the huge NCAA basketball tournament making a comeback, Disney's TV properties, including ESPN, should bounce back in a big way.
The point is, Disney managed to salvage what should have been a disastrous 2020, and it's poised to make a big comeback in 2021. As Disney's vacation and entertainment activity starts to fire back up, this stock should resume its run higher in the next few years.
Wix: Helping even small businesses make a digital transformation
Wix isn't the household name that PayPal and Disney are. However, even if you've never heard of this company, if you surveyed small-business owners who manage a website, there's a good chance some of them will mention Wix. The low-code website building and e-commerce management platform reported nearly 197 million users at the end of 2020, a 19% increase from the year before.
The pandemic forced millions of small businesses to migrate to a more online-friendly format, and the trend is far from over. By the end of February, Wix said it surpassed 200 million registered users, and the company expects at least a 29% revenue increase this year. But adding new tools to its arsenal is also key. Basic functionality is free to use, but it's Wix's premium options that really move the needle.
E-commerce functions such as integrated digital payments, online marketing support, and shipping services are among the offerings. Wix also recently launched a new collaborative web developer platform called Editor X to double down on the new remote work and work-from-home trend. And an expanded collaboration with Alphabet's (NASDAQ:GOOGL)(NASDAQ:GOOG) Google also helps small businesses manage their online presence and Google profile directly from the Wix website management portal.
It may not be a household name yet, but Wix is among a handful of companies helping knock down barriers to small-business ownership and entrepreneurship. Given the company's expected growth this year, the 14 times trailing 12-month revenue the stock trades for looks like a pretty good deal, as does Wix's positive free cash flow-generating operation. Free cash flow margin was 13% last year, which isn't bad for a company spending heavily to promote expansion.
If you find yourself with some leftover stimulus coin and want in on the small e-commerce business boom, consider dropping some of it in Wix stock for the long term.