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PayPal Is Making Big Bets in Cryptocurrency

By Brian Withers and Brian Feroldi - Apr 18, 2021 at 7:51AM

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These latest moves indicate this payments processor is in it for the long term.

PayPal Holdings (PYPL 0.68%) has always been on the cutting edge and its recent announcements underline this fact. The company is going big to enable cryptocurrency for its customers. On a Fool Live episode recorded on March 31, Fool contributor Brian Feroldi discusses its crypto investments, other recent announcements, and what investors should be watching from this digital payments processor in the upcoming quarters.

Brian Feroldi: All right, let's move on to PayPal. PayPal is ticker symbol PYPL. Since the quarter ended, they have made a couple of interesting announcements. No. 1 and the biggest was announced just this week that you can check out with crypto. They allow their PayPal customers in the U.S. to check out and make payments with cryptocurrencies. This, they think, is going to be a game changer for cryptocurrencies utilities, and it's going to allow you to pay for things at millions of businesses by using crypto. Whether you want to believe in crypto or not, PayPal does. That, I think, is a major boost of confidence for them.

No. 2, they made a $100 million investment in a company called TaxBit, which does software for cryptocurrency tax and accounting automation. No. 3, they actually announced they are waiving their check-cashing fees for anyone that gets a stimulus check through their platform.

Last year was a banner year for the company. The fourth quarter was absolutely fabulous. Pick a metric, you can't help but be happy. Revenue was up 23%; total accounts was up 24% to 377 million. Venmo is growing quickly; Venmo grew 60%. Margins rose, so earnings rose 31%. I mean, 2020 was a fantastic year. Management thinks that the good times are going to continue into 2021. They're guiding for 26% revenue growth in Q1 as an acceleration sequentially, and earnings-per-share growth of 50%.

There's no doubt that PayPal get a big-time boost from the pandemic; as we saw, lots of companies do that. The question that I have is will these new users stick around and really adopt PayPal or will they go back to their old way? I think it's the former. Once you get set up with PayPal and see how easy it is to use, I don't think you're going anywhere. That's definitely the thing for investors to watch.

Brian Feroldi owns shares of PayPal Holdings. Brian Withers has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool recommends the following options: long January 2022 $75.0 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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