junto.investing Posted June 7, 2015 Share Posted June 7, 2015 Lots of spinoffs coming up in July*. PayPal is probably the most notable. I'd say most are probably bullish on this one. Given the name and distribution ratio, I don't know that there will be an immediate attractive entry point. Ultimately, the opportunity might be in eBay stub. In any case, what's the bear case on this one? What could potentially drive new owners to sell? *For those that are interested the other spinoffs I'm referring to are NI/CPGX, ENR/EPC, GHC/CABO, and LBTYA/LILA Link to comment Share on other sites More sharing options...
DCG Posted June 7, 2015 Share Posted June 7, 2015 Bear case is that there is now a lot of viable competitors, and switching costs are pretty non-existent. PayPal's biggest advantage (which analysts often ignore or discount) is their fraud protection. That's really what sets PayPal apart. I like PayPal, but would have been much more interested about 4-5 years ago. Link to comment Share on other sites More sharing options...
jawn619 Posted June 7, 2015 Share Posted June 7, 2015 another bear case is that the marketplaces segment isn't worth much because of declining revenues. Link to comment Share on other sites More sharing options...
ritrading Posted June 8, 2015 Share Posted June 8, 2015 Anyone know if the date of the spinoff? Assuming it's been estimated / finalized? Link to comment Share on other sites More sharing options...
SpecOps Posted June 8, 2015 Share Posted June 8, 2015 As a web checkout operator, I know Paypal's competitors are much cheaper, but Paypal has the advantage of its reputation and buyer protection. Don't know how long this will last though as their competitors get more well known. Google Wallet could quite easily pose a real threat but at the moment is a bit useless and Google clearly don't really bother developing it to something that can integrate well on third party websites. That could change though. Link to comment Share on other sites More sharing options...
jawn619 Posted June 8, 2015 Share Posted June 8, 2015 paypal also owns Venmo, a popular and fast growing service, at least in the Northeast Link to comment Share on other sites More sharing options...
fareastwarriors Posted June 8, 2015 Share Posted June 8, 2015 Venmo is huge out here in SF. Link to comment Share on other sites More sharing options...
junto.investing Posted June 8, 2015 Author Share Posted June 8, 2015 Anyone know if the date of the spinoff? Assuming it's been estimated / finalized? I don't think a date has been set yet. I was mistaken in suggesting it was July. Link to comment Share on other sites More sharing options...
junto.investing Posted June 8, 2015 Author Share Posted June 8, 2015 Bear case is that there is now a lot of viable competitors, and switching costs are pretty non-existent. PayPal's biggest advantage (which analysts often ignore or discount) is their fraud protection. That's really what sets PayPal apart. I like PayPal, but would have been much more interested about 4-5 years ago. Competition is my biggest concern. But in addition to fraud protection, I'd think there has to be an advantage in their infrastructure and scale. 4-5 years ago would've been much more interesting, but there's still a ton of opportunity here. Surprisingly cash and check are still the preferred methods of payment worldwide. This is a huge market. So even with some competition, they should continue to get their fair share. They also have a head start here. eBay is loading them up with cash and they generate significant FCF. As an independent company, they'll probably start acquiring some of their competitors more aggressively. Link to comment Share on other sites More sharing options...
jawn619 Posted June 8, 2015 Share Posted June 8, 2015 http://www.google.com/imgres?imgurl=http://l3.yimg.com/uu/api/res/1.2/bBh39qe8qpb3Rof4RLi5ig--/dz05NTY7c209MTtmaT1maWxsO3B5b2ZmPTA7aD01Mzg7YXBwaWQ9eXRhY2h5b24-/http://media.zenfs.com/en-US/video/video.cnbc2.com/30077643c1a2b26d5796c5d18e660693&imgrefurl=http://finance.yahoo.com/video/cramer-time-buy-stocks-000000418.html&h=222&w=395&tbnid=MEd4Ox5ZDLNblM:&zoom=1&docid=hf1AsyEnmLl90M&ei=1Sp2VZjwFpCbyAT9oIDIBA&tbm=isch&ved=0CCMQMygGMAY Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted June 9, 2015 Share Posted June 9, 2015 I definitely agree that Paypal is ahead in fraud prevention by a country mile over V/MA (and FICO solutions) due to their network requiring users to sign up directly through them as opposed to V/MA lending their name to issuers (who do not act in a standardized manner). As long as they continue to control who is in their network directly I think they will have an advantage in fraud protection, which is a major cost for payment networks. I will definitely look to buy PYPL below 20x (preferably <=10x operating income). http://www.bloomberg.com/news/articles/2015-06-08/ebay-drops-as-paypal-cash-flow-forecast-is-cut-on-spinoff-costs?cmpid=yhoo Current price of $60 => ~$75b MC => EBAY = 15 x $2.3b = $34.5b PYPL = 22 x $1.8b = $39.6b *close enough OR EBAY = 13 x $2.3b = $29.9b PYPL = 25 x $1.8b = $45b OR EBAY = 10 x $2.3b = $23b PYPL = 29 x $1.8b = $52b There's not a whole lot of room for growth at this point and I'd be surprised if you could sell EBAY immediately after split for more than 13x (above assumes high-point of guidance). I will probably look to pick up EBAY after the split since I still like their marketplace business a lot. Link to comment Share on other sites More sharing options...
jawn619 Posted June 9, 2015 Share Posted June 9, 2015 I definitely agree that Paypal is ahead in fraud prevention by a country mile over V/MA (and FICO solutions) due to their network requiring users to sign up directly through them as opposed to V/MA lending their name to issuers (who do not act in a standardized manner). As long as they continue to control who is in their network directly I think they will have an advantage in fraud protection, which is a major cost for payment networks. I will definitely look to buy PYPL below 20x (preferably <=10x operating income). http://www.bloomberg.com/news/articles/2015-06-08/ebay-drops-as-paypal-cash-flow-forecast-is-cut-on-spinoff-costs?cmpid=yhoo Current price of $60 => ~$75b MC => EBAY = 15 x $2.3b = $34.5b PYPL = 22 x $1.8b = $39.6b *close enough OR EBAY = 13 x $2.3b = $29.9b PYPL = 25 x $1.8b = $45b OR EBAY = 10 x $2.3b = $23b PYPL = 29 x $1.8b = $52b There's not a whole lot of room for growth at this point and I'd be surprised if you could sell EBAY immediately after split for more than 13x (above assumes high-point of guidance). I will probably look to pick up EBAY after the split since I still like their marketplace business a lot. Ebay has $3.2B of operating income. A 13x multiple is $41.6B Paypal has $2.0B growing at 15-20% for $30B thats 15x OI. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted June 9, 2015 Share Posted June 9, 2015 I definitely agree that Paypal is ahead in fraud prevention by a country mile over V/MA (and FICO solutions) due to their network requiring users to sign up directly through them as opposed to V/MA lending their name to issuers (who do not act in a standardized manner). As long as they continue to control who is in their network directly I think they will have an advantage in fraud protection, which is a major cost for payment networks. I will definitely look to buy PYPL below 20x (preferably <=10x operating income). http://www.bloomberg.com/news/articles/2015-06-08/ebay-drops-as-paypal-cash-flow-forecast-is-cut-on-spinoff-costs?cmpid=yhoo Current price of $60 => ~$75b MC => EBAY = 15 x $2.3b = $34.5b PYPL = 22 x $1.8b = $39.6b *close enough OR EBAY = 13 x $2.3b = $29.9b PYPL = 25 x $1.8b = $45b OR EBAY = 10 x $2.3b = $23b PYPL = 29 x $1.8b = $52b There's not a whole lot of room for growth at this point and I'd be surprised if you could sell EBAY immediately after split for more than 13x (above assumes high-point of guidance). I will probably look to pick up EBAY after the split since I still like their marketplace business a lot. Ebay has $3.2B of operating income. A 13x multiple is $41.6B Paypal has $2.0B growing at 15-20% for $30B thats 15x OI. My numbers are correct. They literally come from Ebay's guidance which is in the link provided... Are you just pointing out that the multiples for OI instead of FCF? They obviously should be lower and are not directly comparable. I think 13x OI for Ebay's legacy business is pretty high price to pay. Link to comment Share on other sites More sharing options...
bizaro86 Posted June 9, 2015 Share Posted June 9, 2015 I will probably look at eBay post spin if it falls. What I'd really like to see is a stubhub spinoff. That would be high on my list of very excellent businesses. Link to comment Share on other sites More sharing options...
junto.investing Posted July 1, 2015 Author Share Posted July 1, 2015 When issued trading begins July 6th. Link to comment Share on other sites More sharing options...
jawn619 Posted July 1, 2015 Share Posted July 1, 2015 Xoom to be Acquired by PayPal in $890 Million deal....That's paying like 5x TTM sales. Management is probably thinking .... well we're a growth stock now anyways. Link to comment Share on other sites More sharing options...
DavidVY Posted July 2, 2015 Share Posted July 2, 2015 I am suprised PayPal didn't pick up WU instead. They make a great online-offline combo and the deal would likely be accretive to EPS+ cashflow Link to comment Share on other sites More sharing options...
hillfronter83 Posted July 6, 2015 Share Posted July 6, 2015 PYPLV trading around $36.5, any buyers? Link to comment Share on other sites More sharing options...
junto.investing Posted July 6, 2015 Author Share Posted July 6, 2015 PYPLV trading around $36.5, any buyers? I plan on holding the shares I receive from the spin. But I'm not adding at this price. Link to comment Share on other sites More sharing options...
krazeenyc Posted July 6, 2015 Share Posted July 6, 2015 I've had a paypal account for a long time and was at one time a powerseller on ebay (over a decade ago). I'm pretty familiar with the product -- although I mainly used it to sell stuff. Once in a while I used paypal to send money to people as well. Anyways, one thing I don't understand is where the long term competitive advantage is. You guys are touting the fraud prevention angle -- you don't mean for customers right? I've had my credit card stolen, had random fraudulent transactions processed, as well as received products not as described. Amex as well as the banks that issue my credit cards have always stepped up to the plate and I've never had to pay for any of those charges. Is there something I'm missing? Why do I need paypal -- other than to occasionally send money to a friend or family member or buy stuff on ebay? Link to comment Share on other sites More sharing options...
leeway Posted July 6, 2015 Share Posted July 6, 2015 for sending money/cash, I just used Chase Quickpay for the first time, and it seems quite convenient. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted July 7, 2015 Share Posted July 7, 2015 I've had a paypal account for a long time and was at one time a powerseller on ebay (over a decade ago). I'm pretty familiar with the product -- although I mainly used it to sell stuff. Once in a while I used paypal to send money to people as well. Anyways, one thing I don't understand is where the long term competitive advantage is. You guys are touting the fraud prevention angle -- you don't mean for customers right? I've had my credit card stolen, had random fraudulent transactions processed, as well as received products not as described. Amex as well as the banks that issue my credit cards have always stepped up to the plate and I've never had to pay for any of those charges. Is there something I'm missing? Why do I need paypal -- other than to occasionally send money to a friend or family member or buy stuff on ebay? They had a very large number of competitors, some of whom were giving their service away for free (and giving away free money to attract new customers). The old Paypal SEC filings list some of their competitors. Paypal isn't really in the business of fraud prevention. They provide a convenient service with a lot of security holes/flaws in it. Paypal succeeds because it doesn't get burned by fraud excessively. It also provides passable customer service (fraud leads to a lot of customer service problems, e.g. when Paypal's algorithms have a false positive and lock legitimate users out of their accounts). 2- If you want to reduce fraud dramatically, you'd make everybody sign up for an account in person with photo ID or some other way of verifying that the person is who they say they are. Paypal does not do this, hence it is more convenient. Link to comment Share on other sites More sharing options...
Jurgis Posted July 7, 2015 Share Posted July 7, 2015 I agree with krazeenyc: I am not sure what niche Paypal fills. I use it very infrequently if I have to pay on some website where I am too lazy to give CC info or they don't take CC. But that's once in a blue moon. Compared to CCs, it's 1% or less transactions for me. Link to comment Share on other sites More sharing options...
DCG Posted July 7, 2015 Share Posted July 7, 2015 I agree with krazeenyc: I am not sure what niche Paypal fills. I use it very infrequently if I have to pay on some website where I am too lazy to give CC info or they don't take CC. But that's once in a blue moon. Compared to CCs, it's 1% or less transactions for me. Well, they are the primary payment company for millions of businesses around the world. They are also a credit card processor (see Paypal Payment Pro). Many sites you pay by credit card with are likely using Paypal. Paypal's big advantage is their fraud detection and protection. Link to comment Share on other sites More sharing options...
Guest Schwab711 Posted July 7, 2015 Share Posted July 7, 2015 PYPL's network is unique in it's setup (in addition to the reputation for being more secure). PYPL has significantly more nodes/links (network map theory) than V/MA because individuals are nodes within PYPL. Businesses that use PYPL often do so because it allows them to avoid regulations related to handling/storing private (secure) data. I think the costs/regulations associated with holding/storing personal data will rise over time and will create a situation where PYPL is a better relative value than V/MA/ect. In general, there are very few payment networks but a ton of processors at various points in the value chain. I think PYPL is the only [uS?] network that covers all aspects of the payment value chain. Of course, Apple Pay and similar products (Square, Google Wallet, ect) are a threat because they are providing the same individual person nodes to V/MA's networks since nearly all of these new products rely on V/MA networks. It remains to be seen if PYPL can maintain a stranglehold on these types of nodes. PYPL recently started offering free payments between individuals for nearly any reason/amount, presumably to fight off Apple Pay and the like. Link to comment Share on other sites More sharing options...
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