After reporting strong earnings last month, shares of PayPal Holdings Inc. (NASDAQ:PYPL) jumped sharply as investors considered the long term potential of the company's business model, and in particular, the success of fast-growing Venmo - an acquisition which many have looked to as a key driver of growth in the quarters and years to come.
Shares of PayPal now trade roughly in line with the company's pre-earnings release value, creating an interesting scenario for investors looking for an opportunity to pick up growth at a relatively reasonable valuation (compared to the recent market peak we have seen in tech).
Questions of whether the market has really peaked in this most recent bull market for large technology names such as PayPal aside, it remains clear to me that the runway for PayPal is sufficiently long to inspire confidence among many investors who are willing to put their money to work for a long period of time to take a chance on PayPal.
The company's Venmo business is booming, with millennial consumers who have crowded into this service likely to drive growth for a very long time, as the consumption model of most Western countries shift from the Baby Boomer era to millennials.
My take on PayPal is that once its Venmo business really takes off and begins contributing in excess of $1 billion of revenue per year and contributes anything really to the bottom line (this business is still burning cash, albeit at a slower rate), investors will really begin to reap the benefits of a long term consumer shift toward solutions such as PayPal, away from traditional banking models which have dominated for centuries.
Invest wisely, my friends.
