Chart of the Week: PayPal Accounts Keep Adding Up for Investors
February 5, 2021
Another earnings bonanza this week saw online payments provider PayPal Holdings Inc (NASDAQ: PYPL) release strong earnings for the fourth quarter of 2020.
The highly-anticipated report didn’t disappoint. Some key numbers for PayPal stood out. Totally payment volume (TPV), one of its key metrics, jumped by 36% year-on-year to US$277 billion.
This came in spite of a 50% decline in volumes from its travel and events verticals. However, PayPal really saw volume rise on the success of Venmo, one of its key peer-to-peer (P2P) transfer services.
The TPV for Venmo shot up by 60% year-on-year to US$47 billion in the fourth quarter.
Perhaps one of the company’s most exciting developments over the fourth quarter was the ability for users in the US to buy, sell and hold cryptocurrencies through PayPal.
What PayPal discovered wasn’t surprising; customers who had been purchasing cryptocurrencies logged into PayPal at twice the rate of their prior login frequency.
Growing that payments ecosystem
For long-term investors, though, identifying those companies that have the much sought-after “network effect” is key. The more people that use a product, the more popular it becomes and the more successful the business it. It’s as simple as that.
PayPal, once again, proved itself to be on the right track. It bumped up its total active accounts to end the year with 377 million, adding 16 million accounts in the last quarter alone – up 24% year-on-year (see below).
Even more startling is the uptake from merchants. PayPal added 1.4 million merchant accounts during the fourth quarter, which was up a whopping 1377% year-on-year.
And with free cash flow of US$5 billion for the whole of 2020 (up 48% on 2019), and a net cash position of US$10.9 billion, PayPal’s business is looking as strong as ever.
Source: PayPal Q4 2020 earnings presentation
Disclaimer: ProsperUs Head of Content Tim Phillips owns shares of PayPal Holdings Inc.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.