PayPal’s (PYPL) numbers are excellent.
Payment processing businesses can be quite lucrative when they reach critical mass. If you need proof, consider that both Visa and Mastercard have operating margins in excess of 50%. PayPal’s profits aren’t quite as high as these, but they’re still substantial.
PayPal’s gross margin and operating margin have averaged 54% and 16%, respectively, over the past five years. In addition, it generates a significant amount of free cash flow (FCF). Management at PayPal is confident that they can generate $5 billion in FCF this year, up from $5.1 billion in 2022. Since the company is trading at a forward price-to-earnings multiple of only 13.6, a large portion of the cash infusion will be used to repurchase shares already issued.
PayPal handled a staggering $355 billion in TPV in the first three months of 2023, despite macroeconomic headwinds affecting the company’s growth potential. The increase from one year to the next was 10%. It’s heartening to see PayPal’s TPV growing at a strong clip when consumer confidence is at an all-time low and discretionary spending is under pressure from elevated inflation.
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The sharp monthly increase in Groupon (GRPN) stock points to an impending positive turnaround
