PayPal’s Day One Report Card

PayPal debuted on the NASDAQ stock exchange yesterday (July 20), trading as a separate entity from eBay – and the initial impression was a positive one.

During its first full day of trading, with the attendant ticker symbol PYPL, shares were up more than 5 percent, or $2.08 to $40.47. That came on volume of 51 million shares. One byproduct over the excitement tied to the stock: The NASDAQ closed at its third straight record session in a row.

Monday’s trading bow marks a return of the company to the public equity realm. The company previously had been listed on the same exchange under the same ticker, before being acquired by eBay in 2002. The purchase price back then was $1.5 billion. Monday’s action would value the total company with a market cap of roughly $52 billion intraday, Reuters reported Monday.

Under the terms of the uncoupling, holders of eBay common stock on record at July 8 of this year received a distribution of one common share of PYPL for every share of common held in eBay. There were no fractional issuances. The when issued status of the stock ceased as of Monday’s trading.

The public debut of PYPL shares marks the culmination of a push by activist investors, including Carl Icahn, for eBay to undertake a corporate transformation designed to split eBay and PayPal.

As is the custom with high-profile companies making a trading debut, PayPal leadership was on hand to ring the opening bell to start the trading day – this time, with a push of the eponymous “PayPal” button.

As PayPal CEO and President Dan Schulman stated in a release marking the start of the company’s public trading, the company is “well-positioned to deliver the benefits of digital money to people around the world. In 2014, PayPal processed $235 billion in total payment volume and generated more than $8 billion in revenues. And last year, PayPal processed $46 billion in mobile payment volume. The company serves more than 169 million active customer accounts in 203 markets [globally].”

In the latest quarter, PayPal’s revenues were up 16 percent to $2.3 billion, with value of transactions growing 20 percent to $66 billion. It should be noted that eBay remains a significant chunk of that volume, with 22 percent of the total or about $14.5 billion.

Sell-side analysts cheered the first day of PayPal’s trading, issuing notes that were by and large sanguine on the company’s prospects. As Reuters noted, nine of the 11 Wall Street analysts issuing recommendations on the name were at “buy” or positive ratings.  One smaller firm, Evercore, has a “sell” on the company.

In reference to valuation, Reuters noted that BMO Capital analysts wrote in an initiation report that investors were likely to begin to value PayPal on a relative basis to much larger companies, including to Visa and MasterCard. But, BMO’s analysis stated, PayPal had a “relatively low EBITDA margin profile” of 27 percent. That EBITDA margin stands at half that of the credit card companies.

Thus far, the price target ranges on the sell side reports range from about $36 to $48, Reuters said.

Many of those analysts noted there are at least some battles to be fought as the company pushes up against larger tech companies looking to make a splash in payments, ranging from Google to Apple.

In initial commentary of her own, MPD CEO Karen Webster looked toward the huge impact the company has made thus far with digital merchants. According to PayPal’s investor deck, PayPal is a presence across 74 percent of online retailers’ sites in the U.S. and a roughly similar percentage in Europe, the Middle East and Africa.

“It’s hard to find another digital ‘buy button’ that comes even close today … and that is so important for understanding just where PayPal is in the competitive race these days,” Webster wrote.

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To check out what else is HOT in the world of payments, click here.

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