Beaver Capital's avatar
$13.6m follower assets
June'22 - Growth Portfolio Update
Sells: None

I was on vacation most of the month, but made a few recent adds. Eyeing up some $MELI in the low 600's here.

YTD return: -42.2%
  • Tough month, but I am LT focused and believe adding on price weakness when the business metrics are improving is a prudent strategy.
  • Will deplete most of cash position in this weakness along with new cash coming in.

*can't link portfolio on CS currently due to not being in US.
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Christian's avatar
$11.5m follower assets
PayPal
Someone wanna tell me when PayPal is done being taken to the slaughterhouse. I mean cmon the takes I’m seeing everywhere is crazy. People acting like they going outta business. Venmo is still a top app and they aren’t done investing in themselves and growing. $PYPL
Don’t blame Mr Market for being irrational. Take advantage
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New CEO for $PINS: Bill Ready is taking over from co-founder/CEO Ben Silbermann. Ready has some solid experience, formerly President of Commerce at $GOOGL, COO at $PYPL, and CEO of Venmo.
IMO, Pinterest has management issues and isn't executing fast enough, this should change now.
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Yegor's avatar
$175.1m follower assets
New PayPal $PYPL Cashback Business Credit Card Launched for US Small Businesses

Looks very interesting and I’m actually considering getting it.
Three Potential Buyouts
With the news of $ZEN finding a new home I figured I would run through three of my favorite companies that are worthy of getting acquired.

1.) $PINS

The company has continued to grow favorably against tough 2021 comps.

Revenue has grown a solid 18% overall with International accounting for most of the growth.

This is despite lower Monthly Active Users overall.

This is thanks to the push for better monetization of the platform.

Competition still has higher ARPU overall but $PINS is rapidly catching up. (data from Q3 2021).

$PINS also has $2.68b in cash and less than $500m in TOTAL debt.

On top of all this, they already had an interested party in $PYPL. Unfortunately, the deal did not work out in the end.

2.) $HOOD

Not too much to explain here I just think the idea of a larger financial institution scooping up Robinhood would be a win for everyone around. Robinhood gets its legal trouble cleaned up and the buyer would get a brokerage with a nice UI and decent User Experience.

In addition, it would grant the buyer immediate access to a built-out crypto ecosystem if that is still a desirable goal.

Unfortunately much like $PINS Monthly Active Users is in decline and quite drastic I might add.

Although AUC hasn't fallen nearly as much.

The real gut punch is ARPU where Robinhood has gotten crushed. With the recent crypto rout, the company has lost a significant part of the fees that it can collect.

But again much like Pinterest, the company valuation has gotten crushed. With $6.2b in cash, $HOOD trades at just under a $7b valuation.

3.) $GPRO

I believe GoPro would make a nice addition to any company seeking to build out a social media/health and wellness application.

Over the last few years, the company has struggled to grow revenue and profit. That is why over the last few years GoPro has attempted to pivot its business model to a more subscription-based model.

The primary driver of these subscriptions is an add-on to camera sales.

With the GoPro subscription, user get access to Quik which is quickly becoming an integral part of $GPRO's ecosystem. Quik offers a social media experience along with cloud storage and video editing tools.

I think this whole package would fit nicely into an already existing Social Media ecosystem.

This push toward subscriptions has led to growing revenue led by ARR and higher overall margins.

GoPro also has $450m in cash with only $550m in total debts.

Now with the company trading at less than 3 P/E and under a $1b market cap it's looking like a pretty nice acquisition target.

If you enjoyed this post I would appreciate a follow and you can also check out my Youtube where I have videos covering both Pinterest and GoPro:

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I own $PINS in a small Tech Portfolio I have, and I am not sure if can be a target for acquisition... from who?
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StockOpine's avatar
$31.5m follower assets
Key notes for $PYPL - Recent Conferences
In this memo we will briefly discuss the key points that grabbed our attention while reading the transcripts of the two conferences.

BofA – Company’s participant Dan Schulman, President & CEO – 9 June 2022

Checkout and BNPL

  • Notes: PayPal Checkout has clear advantages (size, trust, auth rates, lowest loss rates) over competitors as 60% of consumers choose PayPal first (when available) but there is still a lot to be done, with cutting seconds of latency being one of the targets. Additionally, the BNPL has a 21% halo effect on Checkout and 200k merchants already moved PayPal upstream on the product pages. For PayPal, it was not the economics of BNPL that lead to such heavy investments in BNPL but the value proposition they offer to consumers (no late fees) and to merchants (no incremental fees).

The focus on the core product with ongoing investments around it to drive further engagement and potentially higher transaction revenue per user makes sense as the company recently changed its focus from the net new active accounts growth to average revenue per account growth. As engagement increases, people would spend more on the platform and the platform becomes more appealing to new and/or existing merchants.

It is always good to verify these figures with third party data (a bit outdated but we will follow on this):

Take rates

  • Notes: Sequential take rate decline slowed significantly, and it is anticipated that it will continue to be the case.

This is somehow similar to the comments made in the latest earnings call by Gabrielle Rabinovitch SVP, Corporate Finance & IR and Interim CFO. It can be implied that higher growth would be generated from Braintree which has a higher funding cost compared to Venmo.

Braintree

  • Notes: It has key apps on it like Airbnb, Uber, DoorDash, Live Nation, Spotify which use Braintree for the vast majority, if not all their full stack processing. It is considered the most sophisticated tech stack of the company when a merchant integrates full stack processing through Braintree, and it is fully native (seamless experience).

Big upside from Braintree.

Revenue growth

  • Notes: Dan Schulman stated that he feels comfortable and confident of the revenue accelerating growth through the year (Q1 and Q2 of 2021 had eBay and stimulus) but could not commented further for 2023 (premature).

We like the fact that there was no further downward revision on 2022 revenues (as it was the case in Q1) but we feel that this might change soon given the developments in the macro environment.

Investments

  • Notes: The company is investing in its business whereas its competitors seem to be cutting back on investments or even laying off employees. It was also stated that PayPal is not going to chase after non-profitable deals.

PayPal has the cash and generates enough cash to support its investments. Being long in the market and successfully managing the eBay transition (from c.40% of revenue to c.2% while maintaining growth) demonstrates that the company can withstand economic downturns (an economic downturn will have an impact on PayPal results due to reduced consumer spending).

CFO replacement

"There’s no shortage of really outstanding candidates that have raised their hands and I’ve been interviewing left and right and over weekends."

Looking forward to seeing who the new CFO will be and what he/she will bring on the table.

RBC – Company’s participant Douglas Bland, Senior Vice President and Head of Consumer - 14 June 2022

  • Checkout: Indicated (as done by Dan Schulman) that the focus is on reinforcing the checkout business to further streamline the process.

  • Honey/rewards: Other than security and convenience to pay, he considers that Honey has a unique opportunity under the current environment (inflationary period) as customers can benefit from rewards/discounts/savings.

  • Venmo & Digital Wallet: Digital wallet drives further engagement as those who use it generate 2x the average revenue compared to checkout only (nothing new here and like a comment made in Q1). P2P is core and starts the flywheel for Venmo and thus it is considered critical to PayPal as well.

As for Venmo, other than the expected launch with Amazon in the 2nd half of the year, it was stated that other large enterprise merchants are doing more than what was anticipated. We are pleased to see that kind of comments as Venmo has higher take rates.

  • BNPL: On a question for a bigger partnership for the BNPL and pushing off the balance sheet risk from potential credit losses, Douglas responded that this would absolutely be an option as the company is not a bank but rather a payments technology company. He also recognised the fact they are not immune to downturns and from credit delinquencies, however, having over $100m loans with most of them being existing PayPal customers places the company at a better position than just being a standalone BNPL company.

BNPL seems to be a must have offering with Apple recently joining this market (Apple Pay Later) and PayPal responding to the competition with the Pay Monthly Plan (the lender is WebBank) for purchases up to $10,000 (subject to credit approval) over 2 years which offers more flexibility (compared to the Pay in 4 which was for up to $1,500) to consumers that are willing to make larger purchases -> PayPal press release. There are risks in this market as there is lack of regulation and could lead to debt spirals, however, it is very appealing to consumers under the current environment.

  • Credit Card: Another addition to the impressive product offering of the company that was mentioned in the call was the new credit card through the Synchrony Bank partnership. It offers 3% unlimited cashback when you shop using PayPal within the digital wallet and 2% for everything else.

Final Thoughts: The wide product offering improves the value proposition both to consumers (think of BNPL, Venmo, Cards, Rewards, digital wallet etc.) as well as to merchants who have access to the massive number of consumers. By reading through the two transcripts, we did not identify any red flags and as a result we remain bullish on PayPal.

Disclaimer: Not a financial advice.
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StockOpine's avatar
$31.5m follower assets
Do you agree with this 50 stock list?
Name a stock for which you disagree stating the reasoning. We will go first.
$PYPL -> consumer spending could be reduced as the economy slows but we believe that this is already priced in.
Disclaimer: This is not a financial advice.
$META -> Don't bet against Zuck. The recent headwinds are making them stronger (imo) and eventually their push for VR/AR is going to be seen as a good move (less spending in the ST tho).
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