paypal stock vs visa stocks

If You’re Interested in PayPal, Visa Is Right Time to Buy? PYPL vs VISA

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Which stock is a better buy, PayPal or Visa? There are many different factors to consider before deciding which stock is a better buy.

PayPal Holdings, Inc. (PYPL) is a technology platform and digital payments firm that facilitates digital and mobile payments on behalf of customers and merchants throughout the world. PayPal, PayPal Credit, Braintree, Venmo, Xoom, and iZettle are among its payment solutions. Visa Inc. (V), on the other hand, facilitates digital payments between customers, merchants, financial institutions, corporations, strategic partners, and government agencies. VisaNet, a transaction processing network, is run by it.

Because of the near-zero interest rate environment and fewer consumer spending during the pandemic, the credit services business suffered. However, the sector has made a strong comeback as a result of rising credit transactions and rapid technical innovation. In addition, the Federal Reserve approved a 0.25 percentage point rate increase, the first in more than three years. Furthermore, the strong March employment growth may give the Federal Reserve the green light to be more proactive in raising interest rates in order to reduce inflation, which should assist credit services firms create solid revenues. As a result, both PYPL and V should benefit.

PYPL has increased by 22% in the last month, while V has increased by 13.7%. However, V’s gains of 2.4 percent over the last three months outperformed PYPL’s negative returns. Furthermore, in terms of performance over the last year, V is the clear winner with 5.1 percent gains versus PYPL’s negative returns.

Which of these two stocks, however, is a better investment right now?

  • Recent Developments

V announced the acquisition of Tink on March 10, 2022. “Digital tools are driving the new economy,” said Charlotte Hogg, CEO of Visa Europe, “and the combination of Visa and Tink will encourage increased choice and quality of digital money services as the lines between commerce, financial services, and payments continue to converge.”

PYPL announced the introduction of PayPal Zettle in the United States on June 30, 2021, a digital point-of-sale solution that enables small businesses to sell seamlessly across in-person and online channels. “We believe in the potential of small companies,” said Jim Magats, SVP, Omni Payments, PYPL. “We will leverage PayPal Zettle to better support in-person businesses and enable them to go digital easily.”

  • Recent Financial Achievements

For the fiscal first quarter ending December 31, 2021, V’s net revenue climbed 24 percent year on year to $7.10 billion. Non-GAAP net income increased by 25% year on year to $3.90 billion. In addition, its non-GAAP EPS was $1.81, up 27 percent year on year.

For the fiscal fourth quarter ended December 31, 2021, PYPL’s net sales climbed 13 percent year on year to $6.92 billion. Non-GAAP net income increased by 3% year on year to $1.32 billion. In addition, non-GAAP earnings per share were $1.11, up 2.8 percent year on year.

 

Paypal & Visa Financial Performance in the Past and Predictions for the Future

Over the last three years, V’s sales and earnings per share have grown at CAGRs of 6.2 percent and 9.1 percent, respectively. Analysts predict that V’s revenue will grow 18.9 percent in fiscal 2022 and 13.7 percent in fiscal 2023. The company’s earnings per share (EPS) are predicted to rise 18.1 percent in the quarter ending June 30, 2022, and 20.6 percent in fiscal 2022. Furthermore, its EPS is predicted to expand at an annual pace of 18.4 percent over the following five years.

PYPL’s sales and EPS, on the other hand, climbed at CAGRs of 18% and 27.2%, respectively, over the last three years. Revenue is predicted to grow 15.8 percent in fiscal 2022 and 19.7 percent in fiscal 2023. Its earnings per share (EPS) are predicted to fall 2.6 percent in the quarter ending June 30, 2022, but to rise 1.1 percent in fiscal 2022. Over the next five years, PYPL’s earnings per share are predicted to expand at a rate of 17.3 percent per year.

  • Profitability

V has a larger trailing-12-month revenue of $25.48 billion than PYPL, which has a revenue of $25.37 billion. V is also more profitable, with gross profit margins and net income margins of 97.07 percent and 51.59 percent, respectively, compared to 46.99 percent and 16.43 percent for PYPL.

Furthermore, V’s ROE, ROA, and ROTC of 35.59 percent, 13.03 percent, and 18.27 percent, respectively, compare to PYPL’s 19.95 percent, 3.69 percent, and 8.80 percent.

  • Valuation

V is currently selling at 24.13x ahead EV/EBITDA, which is 35.9 percent more than PYPL’s 17.75x. Furthermore, V’s projected non-GAAP P/E ratio of 31.99x is 22% higher than PYPL’s P/E ratio of 26.23x.

As a result, PYPL is the more affordable stock.

  • POWR Scores

In our patented POWR Ratings system, V receives an overall rating of B, which translates to Buy. PYPL, on the other hand, has a C overall grade, which translates to Neutral. The POWR Ratings are determined by taking into account 118 different factors, each of which is weighted to an optimal degree.

V received a B for Quality. This is justified by the company’s trailing-12-month gross profit margin of 97.07 percent, which is 94.5 percent greater than the industry average of 49.91 percent. PYPL, on the other hand, has a Quality grade of C, which is consistent with its trailing-12-month gross profit margin of 46.99 percent, which is 5.9 percent lower than the industry average of 49.91 percent.

V has a Sentiment grade of B, which corresponds to analysts’ expectations that its EPS will rise in the future months. PYPL, on the other hand, has a Sentiment grade of C, which is consistent with analysts’ expectations that its EPS would fall in the near term.

V is ranked #7 out of the 51 stocks in the Consumer Financial Services industry, while PYPL is placed #39.

In addition to what I’ve already indicated, we’ve graded the stocks for Stability, Momentum, Value, and Growth. To see all of the V ratings, go here. You may also find all of the PYPL ratings here.

  • The Result

The credit services business is well positioned to benefit from expected interest rate increases. While both V and PYPL are projected to rise in the long run, it is preferable to bet on V today due to its higher profitability and stronger growth possibilities.

Our analysis suggests that investing in equities with an Overall Rating of Strong Buy or Buy increases one’s chances of success. Here you can find a list of all the top-rated stocks in the Consumer Financial Services industry.

PYPL shares were trading at $112.54 a share on Wednesday afternoon, down $5.11 from the previous day (-4.34 percent ). PYPL has fallen -40.32 percent year to date, compared to a -5.69 percent advance in the benchmark S&P 500 index during the same period.

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