We recently compiled a list of 10 Best Digital Payments Stocks To Buy Now. In this article, we will look at where PayPal Holdings, Inc. (NASDAQ:PYPL) ranks among the best digital payments stocks to buy now.
Digital Payments Industry: An Analysis
It was the global pandemic that catalyzed the contactless ways of payment around the world. As physical stores shut down, digital payment methods became the norm with shoppers looking for a less personal and more digital interaction. According to a poll by the digital payment leader Mastercard, more than half of Americans opted for some form of contactless payment such as tap-to-go credit cards and mobile wallets amid COVID. The trend has continued and is here to stay since more than two in every three in-person transactions globally on Mastercard’s network were reported to be contactless in 2023.
McKinsey’s 2023 Digital Payments Consumer Survey reveals that online purchasing took the lead among all other kinds of digital payments among consumers. With the return of in-person shopping, using a device to pay at retail places by scanning a bar code with it or tapping it on a point-of-sale device, also known as in-store digital payments, has grown. Simultaneously, the in-app digital payments and peer-to-peer payments have risen since 2021. This reflects the already mainstream consumer digital payments which are and will continue to evolve.
The other market which tends to be highly addressable and promising is the B2B digital payments market with businesses looking for more ways to drive efficiency and engage in cross-border business transactions. This market was valued at $1.69 trillion in 2023 and is expected to grow at a compound annual growth rate of 9.38% from 2024 to 2033, as reported by Brainy Insights. Global Payments CEO, Cameron Bready, mentioned B2B payments as the next frontier for payments, with significant growth in the digitization of B2B payments. In an interview with CNBC, he emphasized this big opportunity by predicting the B2B market to be 3 to 4 times the size of the consumer market. According to him, this market remains highly fragmented and under-penetrated.
Our Methodology:
We first used a stock screener and mobile payments ETFs to make an extended list of the relevant companies with the highest market caps. Moving on, we shortlisted the top 10 stocks from our list which had the highest number of hedge fund holders. The 10 best digital payments stocks to buy now have been arranged in ascending order of their hedge fund holders as of Q2 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
PayPal Holdings, Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 87
PayPal Holdings, Inc. (NASDAQ:PYPL) enables digital payments on behalf of merchants and consumers globally. The firm was founded as the world’s first digital payment platform and has been revolutionizing commerce globally for over 25 years. It combines its best-in-class payments platform with value-added services to drive profitability.
PayPal is a trusted global brand with a two-sided network at scale which is exactly its unique competitive advantage. The firm holds an attractive industry position in a $6 trillion-plus global e-commerce market that benefits from the current digitization of payments and commerce. With continued engagement growth and debit card adoption, PayPal is benefitting from Venmo’s strong market position. To further expand its addressable market, the digital payments company is offering more value-added services for consumers and merchants while building omnichannel capabilities.
Apart from the hard-to-replicate advantage and the business strength, PayPal Holdings, Inc. (NASDAQ:PYPL) has strong financial results to offer. Highlights from the fiscal second quarter include net revenues increasing 8% to $7.9 billion, total payment volume increasing 11% to $416.8 billion, and payment transactions increasing 8% to 6.6 billion. With monthly active account growth across PayPal and Venmo, the firm drove customer momentum. Furthermore, it recorded its best transaction margin dollar growth since 2021.
Based on the strength and momentum being witnessed across PayPal, the firm is positioned well for durable and profitable long-term growth. As of Q2 2024, PayPal Holdings, Inc. (NASDAQ:PYPL) was held by 87 hedge funds thereby ranking on our list. Citadel Investment Group was the top shareholder with a stake worth $469 million.
Overall PYPL ranks 3rd on our list of the best digital payments stocks to buy. While we acknowledge the potential of PYPL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than PYPL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.