PayPal JUST Killed Affirm.

a lot of folks want to know if they

should invest in paypal stock and did

paypal just kill the buy now pay later

platform a firm is it time to buy paypal

well let's talk paypal was a 69 stock

less than three weeks ago now it's

trading for a hundred dollars up 11 in

after hours what's going on and is there

any kind of risk factor going on here

and how does this affect a firm well

first some background the company's

growing at about nine to ten percent

revenue and if you take out ebay it's

actually growing at 14 it's core

business which is great if you annualize

the last few quarters of growth you can

actually see they're growing at 16 so

they're doing really really well coming

out of 2021 and even through this crazy

macro environment in fact they barely

even talked about how bad things are in

the economy in their earnings call

because they're producing cash flow in

fact 1.2 billion dollars of free cash

flow even though they did take some

losses on some investments they made and

even though they only added six percent

to their user base they ended up with 16

percent more transactions and total

payment volume up nine percent that

means existing customers are spending

more money with paypal and this makes

sense because in their earnings call

they gave a really neat stat they said

the average customer has 800

transactions per year only 25 of those

are online and paypal thinks that that

25 will grow and maybe more like half of

our transactions will be online in the

future now did they kill a firm well

hopefully not but one of the big things

i hated about paypal's buy now pay later

platform in the past was they would just

do what was called pay in four which is

basically pay every two weeks with your

first payment and then three times

thereafter it's basically pay off

whatever you buy within six weeks i

thought that was lame and a firm had a

really good thing going for it they

would let people pay over time that is

many months well guess what now paypal

is doing that as well oops there goes

the potential affirmate especially since

paypal already has partnerships with

over 200 000 merchants this is a little

bit of an issue given that a firm only

has partnerships with 6 000 merchants

and 90 of the people using buy now pay

later on paypal are actually already

paypal customers so paypal says we

already know their credit histories and

their ability to repay which gives us an

advantage and lower charge offs now

paypal also says they make about 20

extra when people use buy now pay later

with them and that's because of what

they call the halo impact imagine they

make a hundred dollars by because

somebody used buy now pay later with

them maybe they make 21 now on something

else like stocks or savings or whatever

they're becoming more efficient trying

to trim head count and make sure that

they're being a better company so they

have less customer service needs and

they're moving out of stocks like really

focusing employment in the stock sector

because that's not too profitable right

now for them because remember you could

buy stocks with a paypal app but there's

a big thing this company has no control

over and it's called the transaction

expense

that's how much other companies are able

to charge paypal for letting paypal

users use their credit card now that has

become 44.7 percent of net revenues

versus 40.5 percent and it's growing and

the cfo says it's likely to get worse

which given that they're in the payment

processing business and that one thing

keeps getting more and more expensive

how much leverage do they really have

who knows but at the moment this company

is expected to grow their earnings per

share in excess of 20 for the next three

years earnings per share were 2.79 cents

last year now it's expected to be four

dollars and that's expected to grow

again 20 and 20

that's great for a company that's

selling for 25 times earnings you're

really only paying a peg ratio of about

1.25 not a bad way to get exposure to

buy now pay later which is exploding 22

million customers have used that with

paypal and they got cash flow