Is PayPal Holdings Inc (PYPLV) Worth Investing In After Its Spinoff From eBay Inc (NASDAQ:EBAY)?
PayPal Holdings Inc (NASDAQ:PYPLV) has started trading on NASDAQ under what is called “when issued” terms. With shares hitting $36, the payments company’s valuation came to $44 billion. PayPal is set to officially separate from the parent eBay Inc (NASDAQ:EBAY) later this month.
Analysts at Goldman Sachs Group Inc (NYSE:GS) also have a positive outlook for PayPal. The company considers PayPal’s pricing reasonable and has initiated its coverage of the stock with a price target of $48 and a Buy rating.
The question on the minds of many investors is which stock, between PayPal Holdings Inc (NASDAQ:PYPLV) and eBay, is the better option.
According to analysts, PayPal is more likely to trade like money remittance providers Mastercard Inc (NYSE:MA) and Visa Inc. (NYSE:V) than a technology company. Gil Luria of Wedbush also noted that PayPal has a unique growth profile and looks better positioned than most technology companies.
The value in PayPal
One of the greatest values that analysts see in PayPal Holdings Inc (NASDAQ:PYPLV) is that larger rivals have failed in their many attempts to copy its business strategy. PayPal operates a two-way Internet payments service that covers a network of 165 million users in 203 countries. The company also processes payments in 100 different currencies.
Huge growth opportunity
PayPal is clearly well situated to take advantage of the rapidly growing but usually dynamic Internet payments market. Goldman estimates that the payments market is currently worth $34 trillion. PayPal’s current share of that market is just 1%, which indicates significant growth opportunity for the company going forward.
There is plenty of optimism around PayPal, also considering how the business has performed as part of eBay in recent times. In the most recent quarter, PayPal generated more revenue than eBay’s Marketplace at $2.11 billion against $2.07 billion.
Competition in payments market
Despite the massive market potential for PayPal Holdings Inc (NASDAQ:PYPLV), competition is also increasing in the online payments space. With the likes of Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOGL) and many others pushing hard in the payments market, PayPal has well-funded competitors. There is no doubt that PayPal will be able to grow into a much bigger company, but its revenue gains would likely be slower in the long-term because of heightened competition.
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