We recently compiled a list of the 10 Best Digital Currency and Payments Stocks To Invest In. In this article, we are going to take a look at where PayPal Holdings Inc. (NASDAQ:PYPL) stands against the other digital currency and payments stocks.
The Digital Payment Revolution: Growth Trends and Insights
The digital currency and payments sector is rapidly evolving, driven by technological advancements and changing consumer expectations. Digital money continues to reshape how transactions are conducted, making them faster, cheaper, and more accessible. According to a report by The Business Research Company, the global digital payments market was valued at $115.93 billion in 2023. The market is expected to expand at a compound annual growth rate (CAGR) of 9.3% during 2024-2028 to reach a value of $180.26 billion by the end of the forecast period.
The rise of e-commerce and technology-driven initiatives is significantly boosting the digital payments market. Consumers are increasingly choosing non-cash payment methods because they are easier and more convenient for transactions. This trend is expected to lead to a growth in low-cost payment terminals and methods like QR codes in the near future.
A major driver behind this shift is the younger generations, particularly millennials and Generation Z, who are quick to adopt digital payment services. Online banking has become a popular choice among young users, who demand personalized and flexible experiences. As businesses adapt to these expectations, enhancing customer experience has become crucial for success in the competitive digital payment landscape.
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The McKinsey Digital Payments Survey 2024 reveals that the use of digital payments is steadily increasing in both the United States and Europe. Approximately 9 in 10 consumers in these regions have made at least one digital payment in the past year, with the US reaching a record high of 92%. In the US, in-app and in-store digital payments are growing rapidly. In-app purchases now account for 60% of digital payment usage, up by 8 percentage points since 2019. Additionally, the adoption of digital wallets for in-store transactions has risen from 19% in 2019 to 28% in 2024. This shift represents a significant market, with around $10 trillion spent annually by consumers across the United States and Europe.
Notably, the survey also found that about one in five users often leave their physical wallets at home, opting for digital payment methods instead. In-store digital wallet usage is similar between the US and several European countries. This also includes traditionally cash-heavy nations like Germany and Italy, where about a quarter of respondents reported using digital wallets for in-store purchases in the past year. This trend indicates a broader acceptance of digital payments among consumers across various markets.
Methodology
To compile our list of the 10 best digital currency and payments stocks to invest in, we consulted various online resources and also reviewed our own rankings. This exercise provided us with a list of the best digital money stocks. From an initial pool of more than 20 digital currency and payments stocks, we focused on the top 10 stocks most favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2024 database of 900 elite hedge funds. The 10 best digital currency and payments stocks to invest in are ranked in ascending order based on the number of hedge funds holding stakes in them.
Why do we care about what hedge funds do? 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).
A consumer in a cafe paying for goods using a mobile payment app.
PayPal Holdings Inc. (NASDAQ:PYPL)
Number of Hedge Fund Holders: 90
PayPal Holdings Inc. (NASDAQ:PYPL) is a leading financial technology company that operates a robust online payment system and facilitates online money transfers across approximately 200 markets. It enables digital and mobile payments for consumers and merchants, making transactions easier and more secure. PayPal Holdings Inc. (NASDAQ:PYPL) is one of the best digital money stocks to invest in.
In the third quarter of 2024, PayPal Holdings Inc. (NASDAQ:PYPL) reported impressive financial results. Net revenues rose by 6% to $7.8 billion, while total payment volume increased by 9% to $422.6 billion. The company also saw a significant rise in GAAP operating income, which grew by 19% to $1.4 billion. These results indicate strong operational performance and effective management strategies.
Innovation is at the core of PayPal’s (NASDAQ:PYPL) growth strategy. The company has introduced new mobile checkout experiences designed to enhance conversion rates significantly. Over the past few quarters, the company completed testing over the past few quarters and is now rolling out new experiences to customers on both desktop and mobile. The new product experiences can lead to conversion lifts of over 100 basis points for vaulted checkouts and up to 400 basis points for one-time checkouts. Additionally, PayPal’s (NASDAQ:PYPL) “Buy Now, Pay Later” service has seen a usage increase of 15% to 20%.
With its focus on innovation and strong financial performance, PayPal Holdings Inc. (NASDAQ:PYPL) is well-positioned for future growth. These factors make PYPL an attractive investment opportunity in the digital payments sector.
Artisan Partners stated the following regarding PayPal Holdings Inc. (NASDAQ:PYPL) in its Q3 2024 investor letter:
“Our top contributor was PayPal Holdings Inc. (NASDAQ:PYPL), a financial technology company that enables digital and mobile payments between consumers and merchants. PayPal was a recent new purchase added to the portfolio in Q2. Better growth in payment volumes and transaction margins during PayPal’s latest quarter offered evidence that the new management team’s efforts are gaining traction. Notably, payment service provider Braintree returned to providing positive transaction margin, branded checkout contributed strongly to payment volume growth, and monetization at Venmo showed progress. Post-COVID, PayPal’s shares had been pressured by intensifying competition, the threat of which was seemingly exacerbated by prior management missteps. Shares traded for under 14X next year’s expected earnings at the time of our initial purchase. This was an attractive entry point to purchase a stake in a business with above-average—and improving—unit economics, a strong balance sheet and consistent free cash flow. Competent new management is already leaning on the company’s strong financial position to maximize the value of these assets.”
Overall, PYPL ranks 3rd on our list of the best digital currency and payments stocks to invest in. While we acknowledge the potential of PYPL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an 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 is originally published at Insider Monkey.