On the heels of PayPal holdings Inc. (Nasdaq:PYPL) first-quarter profit, the stock jumped from $74 to $77.50 last week. But the success did not hold. In fact, the shares of PayPal now back to 74$.
But I think there are several key reasons to be bullish. In the end, the report in the 1st quarter shows once again that the company is in the growth phase, with revenues up 24% to 3.69 billion dollars, but profit grows 29% to 57 cents a share. The wall Street consensus, on the other hand, was looking for revenues of 3.59 billion and a profit of 54 cents per share.
The user will also have a positive impact on the shares of the company PayPal. For the current quarter, the company expects revenue in the range of 3.79 billion $to 3.83 billion, against analysts ‘ forecast of 3.75 billion. As for the bottom line, a guide to 55 cents per share, just one penny from consensus wall Street.
Okay, so why the precariousness of PayPal stock after the announcement of profit? Well, there is pressure on margins as the company continues to invest in new technologies. Is the transition to new platforms, such as venmo. Be aware that venmo is a peer to peer payment system has, as a rule, a lower structure.
Further, stocks in PayPal already had a strong run. In the last year of the campaign included an impressive 57% of the profits. And, Yes, this means that assessment is far from cheap. Believe that the price-earnings ratio is 50.
Finally, there are ongoing concerns about the separation of PayPal and eBay Inc (US:eBay), which plans to move to adyen to process payments.
Key factors for the stock PayPal
When Daniel Shulman took the reins of PayPal in the summer of 2015, he promised to double down on e-wallet, but also focus on young users. To this end, he was aggressive with the formation of partnerships that allowed us to increase the availability of the platform PayPal.
There is an extensive agreement with the mega-financial institutions such as Visa Inc (indexin), Houston JPMorgan chase & co. (Ticker NYSE:jpm) and Bank of America Corp (Ticker NYSE:DKS). For example, last week PYPL and Barclays (ADR)(Ticker NYSE:BKS) announced a wide-ranging agreement that will include cross-promotion of their products.
Meanwhile, PYPL continues to create alliances with major technology companies like Apple. (Indexshares aapl), Facebook Inc. (Nasdaq:FB) and alphabet Inc (USA:stock markets, indices,analogs). In fact, the company managed to get about half of the Alibaba group holding LTD (NYSE Ticker:Baba) Aliexpress active sellers on its platform.
The bottom line on PYPL stock
In venmo came through the acquisition in 2013. At that time, venmo was a much smaller part of Braintree payments. Without a doubt, it was one of the largest M&A transactions in the history of technology.
Again, the last quarter showed stability in venmo, with volume spiking 80% to $ 12 billion. Keep in mind that PYPL had to provide a minimal amount for marketing, as the Platform has a strong viral elements and network effects. In venmo has also helped to increase the capacity of the company, with the volume impact in Q1 49 billion.
The payment service has become a must for millennials, which is the demographic that difficult goal. Venmo social functions and to exponential growth, as users share their purchases with friends.
Now, venmo is still in the early stages of monetization. But given the ramp of growth and focus on young users, the business is likely to be a strong catalyst for the long haul. In other words, exchange PayPal looks like a good way to capitalize on the secular trend towards mobile payments.
Tom Taulli is the author of high-profit IPO strategies, All about commodities and all about short sales. Follow him on Twitter at @ttaulli. At the time of this writing, he has not held positions in any of the above securities.