Thursday, May 7th 2020
“On May 1, we had our largest single day of transactions in history, larger than last year’s transactions on Black Friday or Cyber Monday... I would characterize April as perhaps our strongest month since our IPO.” -Daniel Schulman, CEO of PayPal (May 2020)
PayPal surged +9% after hours on Wednesday after reporting a strong long-term outlook that brought its stock price to new all-time highs.
The stock initially tumbled nearly 5% on the print as investors digested quarterly highlights from the earnings release.
However, it subsequently went on to rally almost +14% as the investor call began and management revealed some very positive data points about the business's long-term prospects.
The investor call was one of the most insightful we've been on in recent history, and offered a plethora of insights around consumer behavior that we believe will have material implications not just for PayPal, but for any company with material exposure to retail spending.
These are what’s known as “read-throughs” in the investor community. Our top takeaways and read-throughs from the call are below:
1.) A confluence of recent developments (ranging from new user cohort adoption to accelerating contactless payment demand) have structurally improved PayPal's long-term growth thesis
2.) The April recovery out of March weakness was far stronger than we anticipated, and was marked by "unprecedented demand" across all platforms
3.) Venmo has seen its platform expand dramatically across new use cases and new user cohorts, a large portion of which may prove structural
4.) Finally, some new color emerged on PayPal's "Zoom": the segment sitting within the payments giant that has been acquiring users at a triple digit pace in recent months
1.) Expect to see online spending remain elevated at pandemic-like levels even after quarantine restrictions are lifted - a dynamic that may throw a wrench in the initial pace of the recovery in brick-and-mortar retail
2.) The eCommerce sector has likely gained 2-3 years of structural growth over the past 2-3 months
3.) As much as 33% of the recent uptick in online grocery spending may remain structurally in place post-quarantine - boding very well for investors in Amazon, Walmart, and privately-held Instacart
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