In this clip from "The Rank" on Motley Fool Live, recorded on Feb. 7, Motley Fool contributors Taylor Carmichael, Jason Hall, and Matt Frankel discuss which fintech stock they think might be the first to hit a trillion dollars one day and why PayPal (PYPL 2.78%) is a top contender.
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Taylor Carmichael: Yeah. I love PayPal. This is the one out of the 10 that my family owns is PayPal. This is a near-term hit they took. Personally, I think the reason they took a big hit is because crypto took a hit in December. That has hit anybody who trades in crypto or PayPal, or their Venmo app. People can buy and sell crypto. I think that hit their numbers hard. I know it hit Silvergate Capital (SI 8.70%). I expect it to hit [Block, Inc.] Square (SQ 4.79%) as well. Basically, two major parts of PayPal's business are fairly new and one is the buy now, pay later. It was huge a few months ago and they're now selling crypto on the Venmo app. I actually like PayPal's approach more than I like Jack Dorsey's approach to crypto. Dorsey is an evangelist for Bitcoin (BTC 0.18%). He likes Bitcoin and nothing but Bitcoin. PayPal's more agnostic. They will do several different crypto on their site and I think that is the way to go, personally, and that is a smarter business move. PayPal followed Square into this, but they are being more pragmatic about it. I think there's a tremendous upside for their business, both from crypto and from buy now, pay later. I'm very bullish on PayPal and I actually think over the next year, their stock is probably going to be the best out of the 10 here. I see them jumping back. You can't really predict in the short-term, but I do think they're going to get to where they were fairly quickly. I think this was a volatile quarter for them, but I do think that was crypto-related, personally.
Jason Hall: I think the expectations are, within context, about as low as they've been for PayPal in a very long time. I really do. And that alone, this is going to continue to be a great performing business. In 10 years from now, is it going to be the best performer? No. Over the next three or four years, I think it has a very good chance to be the best performer.
Matt Frankel: I think one thing a lot of people are missing about PayPal and, this is why I love the company right now, is that they've become an investor, not just a business on their own. It made big investments in some of our favorite stocks, MercadoLibre (MELI -0.97%) Uber, (UBER 3.07%)they were an early investor in. They've proven their ability to allocate capital, which for someone who loves the financial sector, that's definitely a big asset you like to see. PayPal is very profitable despite the fact that their growth expectations have been lowered. It's really just a great profitable business. They're generating about $5 billion in free cash flow every year that they can use it to expand their offerings, like how Taylor mentioned with crypto and things like that. Or, it could invest in partnerships or in acquisitions. They just have so much optionality. I think they're not done growing yet. I think that now the expectations have gone to the downside a little bit too much, but that's where I'm at. That's why I ranked it so much higher than all of these others.
Carmichael: Matt, do you think that they can hit a trillion dollars one day?
Frankel: I do. I'm not sure what fintech will get to a trillion dollars first, but I'd say the odds are pretty high with them.
Carmichael: I'm with you on that, I think. I'm very bullish on PayPal.
Frankel: I think Square or Block, or whatever you want to call it now, could definitely do it. I think it's a lot more likely for PayPal.
Carmichael: Now that Jack Dorsey is the CEO.
Frankel: You don't think so?
Frankel: I think that PayPal has a clearer path.