Hey there! With your interest in technology I thought you might like to learn about PayPal – a big name you probably use online without thinking much about the backstory or business behind the company. Given some recent stock volatility, you might wonder – who owns and controls PayPal these days? And is the company still going strong or losing its edge?
I‘ve followed PayPal for years as a fintech business analyst. I‘ll give you an insider overview analyzing where PayPal came from, who owns it now, how much it‘s worth, and whether it can fend off hungry fintech newcomers!
PayPal‘s Wild Early Days
It all began during the dot-com boom in the late 1990s, when brilliant entrepreneurs saw the potential of online payments.
Elon Musk (yes, that Elon Musk!) founded an online bank called X.com in 1999. Meanwhile Max Levchin and Peter Thiel were working on a digital wallet product for handheld personal devices. Their startup Confinity landed $4.5M in funding by 2000.
Here‘s where it gets interesting – that same year X.com and Confinity merged into what became PayPal. There were some major power struggles among the strong personalities though – especially between Musk and Levchin. Musk even took over briefly as CEO before the board fired him!
So why did PayPal succeed when hundreds of dot-com era startups failed? A few key innovations:
- Allowing cheap peer-to-peer money transfers
- Tie-in with eBay auctions provided volume
- Fast account sign-ups and instant transfers
Winning over power eBay users gave PayPal insane early traction.
13 Years Under the eBay Umbrella
Fun fact – did you know eBay bought PayPal back 2002 for $1.5 billion? PayPal had gone public just months before.
At the time it made perfect sense – PayPal processed payments for countless eBay auctions. Combining forces created big revenue synergies.
Check out how quickly PayPal revenue grew under eBay ownership:
Year - Revenue
2007 - $1.7 billion
2012 - $5.6 billionBy 2012 PayPal handled $145 billion in payments annually and accounted for 39% of eBay‘s profits. It was killing it!
But after more than a decade, PayPal had expanded far beyond eBay use cases. The board decided it was time for PayPal to stretch its wings as an independent company again.
PayPal Takes Off – Growth and Ownership Today
In July 2015, PayPal began trading independently on NASDAQ under the ticker PYPL. The results were spectacular:
Jul 2015 - Jan 2023:
Stock Price - +247%
Market Cap - $44B to $90BFreed from eBay, PayPal accelerated growth by acquiring complementary fintech providers:
- Braintree – payment processor handling Uber, Airbnb, etc
- Hyperwallet – global payout platform for freelancers
- Honey – browser coupon finder
- Venmo – popular payment app with younger users
The network effect of this ecosystem has powered user and revenue growth:
2020:
Users - 346 million
Revenue - $21.4 billion
2022:
Users - 432 million
Revenue - $27.5 billion Today PayPal is an independent, publicly-traded company following its spinoff in 2015. No single entity owns a controlling stake. The biggest shareholders are:
1. Vanguard - 8.4%
2. BlackRock - 6.7%
3. State Street - 4.3%The rest is owned by smaller institutional investors (59.7%) and retail investors like you and me (18%).
So in short – Wall Street owns a majority stake but no single player calls the shots. PayPal has stayed strategically agile while also keeping shareholders happy.
Let‘s analyze trends in PayPal‘s growth and valuation next. Is it still a fintech leader primed for future success?
Valuation and Growth Projections
Fintech exploded during the pandemic as consumers migrated online for shopping, banking, investing – everything!
PayPal initially benefited big time. The stock price nearly tripled from March 2020 lows near $80 per share to an all-time high near $310 in July 2021.
Wall Street cheered as revenue and profit margins expanded. PayPal‘s valuation also exploded to around $350 billion – incredible for a company that started from a messy merger just 20 years earlier!
But over the past year, fintech has struggled in the face of threats like inflation, rising rates, and recession fears. PayPal‘s stock slid 65% in 2022 as part of this broader sell-off.
Does this huge drawdown signal a declining business? Not according to the financials:
Year-over-year growth:
Revenue -> +13%
Profit -> +16%
Users -> +9%PayPal is gaining share in a growing market. Payment volume also grew 13% in 2022 to $1.3 trillion.
The real issue is Wall Street‘s fear that growth will slow significantly. But I expect online commerce and digital banking to march steadily higher over the long run.
As The Motley Fool suggests, PayPal‘s current valuation around $90 billion seems cheap compared to its proven ability to adapt and expand.
If inflation falls and consumer strength persists, PayPal should deliver double-digit growth for years to come.
Estimates suggest the stock could double if macro conditions improve. But it faces some competitive threats we should analyze too.
Battling Hungry Fintech Rivals
Tech giants see the opportunity in digital payments and are plowing in. Who presents the biggest threat?
Apple Pay – Apple‘s payment network is hooked into iPhones and Macs used by over 1 billion people. But PayPal maintains a wide edge with merchants online.
Square – Its merchant hardware and APIs make integrating payments easy for small biz. But Square lacks PayPal‘s two-sided merchant/consumer network.
Crypto startups – Blockchain payment tech draws huge hype but minuscule real-world usage so far. Not an imminent threat yet.
The bigger unknowns are fast-emerging payment trends like:
-
Buy Now Pay Later (BNPL) apps like Affirm divide purchases into interest-free installments. Risky but popular with younger shoppers.
-
Embedded finance startups enable developers to easily "embed" payments and banking within any app. Stripe and Ramp lead here.
I expect PayPal will continue acquiring hot startups in areas like BNPL and crypto/blockchain to stay on the cutting edge. No competitor matches their brand, scale, volumes, and product breadth today.
But the competitive moat surrounding consumer fintech seems less defensible than in the past. PayPal must keep innovating through services and top-notch experiences to hold its crown.
PayPal in a Nutshell
Let‘s recap the key stats for this fintech giant:
All-Time High Share Price: $310
Current Market Cap: $90 billion
2022 Revenue: $27.5 billion
2022 Payment Volume: $1.3 trillion
Top Owners:
- Vanguard – 8.4%
- BlackRock – 6.7%
Verdict: While economic worries have deflated most fintech valuations, PayPal retains fundamentally strong growth and leadership in online payments.
I expect it to remain a dominant force enabling the global shift to digital banking and commerce over the long run. Capturing even a fraction more of that enormous opportunity can drive big shareholder returns.
So what do you think – does PayPal withstand the latest round of fintech frenzy from startups looking to eat their lunch? Based on the growth roadmap I‘ve analyzed here, I‘m betting they have enough strategic assets to fend off attackers and maintain leadership.
Let me know what other tech giants you want to see covered related to trends in digital payments and fintech!