Why Paypal Is So Interesting
Despite some challenges, this narrow-moat company has a big opportunity ahead, says Morningstar's Jim Sinegal.
Despite some challenges, this narrow-moat company has a big opportunity ahead, says Morningstar's Jim Sinegal.
Jim Sinegal: PayPal (PYPL) is one of the most interesting companies we're covering at the moment for a few reasons. First of all, they have a big head start in the digital-wallet game. Second, they have a large and growing network of users and merchants who accept it online. And third, they have a great new management team led by Dan Schulman, formerly of American Express (AXP).
The big issue for PayPal is that the line between online and physical commerce is blurring. They have historically had a strong hold in the online space. A lot of online merchants accept PayPal, whereas people still use cards, for the most part, at physical merchants. What's happening now is that you can use your smartphone to buy something online and also to pay at a physical store with something like Apple Pay. That's going to be a big problem for PayPal to deal with. On the other hand, there is a unique opportunity there. PayPal isn't linked to the devices themselves, like Apple's and Google's solutions are. And PayPal is positioning itself as a merchant-friendly alternative. Merchants do not like the existing payment system; it costs a lot for them. So, PayPal really has a big opportunity there.
We have initiated coverage on the name with a $42 fair value estimate. We think because of the company's moat, its brand, its network of users, as well as the number of opportunities it has to expand going forward, it would be an interesting name to pick up at a discount to our fair value.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.