Recently, PayPal (PYPL 0.19%) has fallen short of expectations, but in this segment of "Ask Us Anything" on Motley Fool Live, recorded on Feb. 28, Fool contributor Matt Frankel discusses why there is untapped potential with the fintech company.
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Matt Frankel: Well, since this is the inflation show. First of all, I wanted to say that PayPal is the stock that I would own during inflation. Generally, they make a percentage of the transaction volume that comes through their site, which would generally keep up with inflation. People are spending 10% more on groceries, gas, things like that. You would expect PayPal's payment volume to go up accordingly. All things being equal.
With PayPal, it's definitely one of the most beaten-down fintechs right now, and for good reason to be fair, growth did not nearly meet expectations. They've been saying that within the next few years they're going to get to 750 million members. That's just not going to happen, they might get to about 500, they're in the fours right now.
Growth has slowed significantly. I view PayPal as similar to Apple (AAPL 1.81%) about five years ago when it made that transition from growth stock to value stock. It's an uncomfortable transition where the market doesn't really know how to value it very well. But I still like PayPal, there's still a powerhouse over $1.2 trillion of annualized payment volume.
Venmo is still in the relatively early stages of monetization, and they said that that's going to be their priority going forward is monetizing their current user base rather than all-out growth, which speaks to the transition from growth to value stock.
But I think there's a lot of untapped potential there. They really haven't monetized their user base as effectively as I think they could and there is still some growth it might be a little slower than 30% year over year for the foreseeable future like they had planned originally. I'm still a fan of PayPal even more so at these lower levels, I don't own the stock, but it has jumped at the top of my watchlist.
