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Is PayPal a No-Brainer Fintech Investment?

By Brian Withers and Toby Bordelon - Updated Jun 25, 2021 at 1:53PM

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Its most recent earnings seem to point in that direction.

PayPal Holdings (PYPL -1.71%) stock has been a stellar investment since the company split from eBay in 2015. The stock has rocketed up sevenfold since the split and it doesn't seem to be slowing down. Furthermore, the pandemic has been a tailwind for this e-commerce digital payments platform as it continues to put up solid double-digit growth on the top and bottom lines. On a Fool Live episode recorded on May 26, Fool contributors Toby Bordelon and Brian Withers discuss the most recent quarter and whether this digital payments leader is a no-brainer buy for investors.

Toby Bordelon: Let's talk about PayPal. Great company. This is a great company, continued to perform well. The last quarter was good. Revenue increase of 31%, operating income up 84%. Now, both of those are good numbers, right? But that operating income increased almost three times revenue on a percentage basis. I love that. Because that reveals an ability to keep their costs down and to grow their margins as they grow revenue. What does that mean? They're not paying up for growth. They are growing very efficiently and that is what you want to see from any company. Great job there.

Cash flow up 24%. Really great. Up to $1.76 billion, I think, for operating cash flow. It's a cash machine here. Management has some bold ambitions. They have about 400 million users. They were less than 400 million users today. They want that to be 750 million in the next four years. They are looking to hit one billion transactions per day as a long-term goal. That would be impressive.

We did a deep dive on this company last week, I think, Brian Withers, I'm remembering. I think if they came out to me as I was studying for that is that the payment space is very competitive. The electronic transfer space is very competitive. It's only getting more competitive. But PayPal keeps on delivering. They keep growing. They keep innovating. They keep staying in the mix with everyone who comes in to try to compete here, and they're right there at the top. I foresee big things to come for them and I would be very happy to continue to be a shareholder in this company despite the increasing competition.

Brian Withers: Thanks for that, Toby. I ran across PayPal this morning. I was at my doctor's office and they had a PayPal little card reader to take my payment. It was hooked up to their computer and made it super easy to pay them [laughs] and take the money from my credit card. PayPal seems to be firing on all cylinders. Is it a no-brainer buy right now for investors?

Bordelon: I wouldn't necessarily call it a no-brainer. I mean, the growth has been great. The stock price has moved up, too. There is that. I think that it is a key part of e-commerce and digital payments. If you're going to invest in that space, you're going to make that part of your portfolio, yeah, I think you're going to be in PayPal. I think you want PayPal. I think that's an obvious company to put within a basket in that electronic money if you want to think of it that way, electronic payments.

Not necessarily for everyone, but certainly, if you were looking at the kind of payment space, you're going to want to have it as an anchor part of that part of your portfolio.

Brian Withers has no position in any of the stocks mentioned. Toby Bordelon owns shares of PayPal Holdings and eBay and has the following options: long January 2023 $45 calls on eBay, short January 2023 $45 puts on eBay, and short July 2021 $55 calls on eBay. The Motley Fool owns shares of and recommends PayPal Holdings. The Motley Fool recommends eBay and recommends the following options: long January 2022 $75 calls on PayPal Holdings and short June 2021 $65 calls on eBay. The Motley Fool has a disclosure policy.

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Stocks Mentioned

PayPal Holdings, Inc. Stock Quote
PayPal Holdings, Inc.
$95.32 (-1.71%) $-1.66
eBay Inc. Stock Quote
eBay Inc.
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