Tag: PayPal Holdings

Investing in Love: 4 Stocks That Capture Valentine's Day Sentiment

Posted on by The INO.com Team

Valentine’s Day is a time to celebrate love and romance, whereby people express their affection by exchanging candy, cards, flowers, jewelry, and other gifts with their special ones. This annual Lover’s Day has become extremely popular, and creative retailers are preparing to cash in on this event.

Americans really like to spend on their loved ones for Valentine’s Day. According to the annual survey released by the National Retail Federation (NRF) and Prosper Insights & Analytics, total spending on Valentine’s Day is expected to reach a new high of $14.20 billion in 2024, or a record $101.84 per person.

“Retailers are ready to help customers this Valentine’s Day with meaningful and memorable gifts,” said Matthew Shay, NRF President and CEO. “With consumers prioritizing their spouse or significant other this year, retailers expect to see a shift in spending for certain gifting categories.”

The top gift categories include candy (57%), greeting cards (40%), flowers (39%), an evening out (32%), jewelry (22%), clothing (21%) and gift cards (19%). New spending records are anticipated for jewelry (around $6.4 billion), flowers ($2.6 billion), clothing ($3 billion) and an evening out ($4.9 billion).

More than half of customers (nearly 53%) plan to celebrate Valentine’s Day this year, on par with 52% in 2023. Overall, consumers plan to spend a total of $25.8 billion to celebrate Valentine’s Day, on par with the previous year’s spending and the third highest in the survey’s history.

Now, let’s take a close look at the fundamentals of four key stocks that might thrive this Valentine’s Day:

Berkshire Hathaway Inc. (BRK.B)

Warren Buffett is widely considered one of the greatest investors of all time. One way to share in his success is by investing in his holding company, Berkshire Hathaway Inc. (BRK.B)v, whose market capitalization stands at $861.40 billion.

BRK.B owns a mix of businesses across several industries. The profits from these businesses accumulate on Berkshire Hathaway’s balance sheet, and Warren Buffett and his team use these funds to expand the company, make new investments, and so on.

Since 1972, Buffett’s leading conglomerate owns See’s Candies, a beloved brand for candies, particularly chocolates. Today, more than 50 years later, this candy brand has grown into a testament to the power of brand loyalty, high-quality products, and intelligent management.

With its steady growth, See’s Candies provided BRK.B with an income of nearly $2 billion, representing an impressive return of more than 8,000%, or approximately 160% a year. Beyond its financial triumphs, this brand holds a special place in Buffett’s heart as it embodies his investment philosophy, which prioritizes businesses with competitive advantage, reliable cash flows, and a focus on customer satisfaction.

For most people, chocolate and candy are the perfect way to celebrate Valentine’s Day as they associate them with emotional connections, primarily driving See’s Candies sales and ultimately giving a significant boost to BRK.B’s stock.

BRK.B’s trailing-12-month EBITDA margin of 31.46% is 49.4% higher than the 21.05% industry average. Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 15.63%, 9.86%, and 7.52% are higher than the industry averages of 10.67%, 6.41%, and 1.09%, respectively.

For the first nine months that ended September 30, 2023, BRK.B’s total revenues increased 21.1% year-over-year to $271.11 billion. Its earnings before income taxes were $73.23 billion versus a loss before income taxes of $52.61 billion in the prior year’s period. Its net earnings came in at $59.39 billion, compared to a loss of $40.24 billion in the same quarter of 2022.

Analysts expect Berkshire Hathaway’s revenue and EPS for the fiscal year (ended December 2023) to increase 4.1% and 24.4% year-over-year to $314.42 billion and $17.39, respectively. Moreover, the company topped the consensus EPS estimates in three of the trailing four quarters.

BRK.B’s stock is already up nearly 11% over the past six months and has gained more than 28% over the past year. Further gains could come with a Valentine’s Day rally.

PayPal Holdings, Inc. (PYPL)

Another stock that could capture Valentine’s Day sentiment is PayPal Holdings, Inc. (PYPL). With a $63.14 billion market cap, PYPL operates as a technology platform enabling digital payments on behalf of merchants and consumers. As digital payments continue to rise across the globe, PayPal remains a strong player in the fintech industry.

Valentine’s Day might cause an influx of online transactions. Spending surges as consumers celebrate Valentine’s Day with memorable gifts for their friends and loved ones, propelling digital payments worldwide and benefiting PYPL considerably.

On January 25, 2024, PYPL announced six innovations to revolutionize commerce through artificial intelligence (AI) driven personalization for merchants and consumers. During the PayPal First Look keynote, President and CEO Alex Chriss introduced a completely new PayPal checkout experience; Fastlane by PayPal, a faster guest checkout experience; and Smart Receipts, giving customers AI-personalized recommendations from merchants.

Further, the company introduced the PayPal advanced offers platform so merchants can provide personalized, real-time offers to consumers and drive sales; a reinvented PayPal consumer app offering shoppers new ways to earn cash back; and Venmo’s enhanced business profiles so that small businesses can find and engage new customers and grow their businesses.

PYPL’s trailing-12-month ROCE, ROTC, and ROTA of 20.55%, 9.43%, and 5.17% favorably compared to the industry averages of 10.76%, 6.44%, and 1.08%, respectively. Also, the stock’s 18.40% trailing-12-month levered FCF margin is 3.2% higher than the industry average of 17.83%.

During the fourth quarter that ended December 31, 2023, PYPL’s non-GAAP net revenues increased 8.7% year-over-year to $8.03 billion. Its non-GAAP operating income grew 10.6% from the prior year’s quarter to $1.87 billion. Its non-GAAP net income and non-GAAP EPS came in at $1.60 billion and $1.48, up 13.2% and 19.4% year-over-year, respectively.

Furthermore, the company’s free cash flow was $2.47 billion, an increase of 72.3% year-over-year. Its fourth-quarter total payment volume (TPV) grew 15% from the year-ago value to $409.80 billion. Its payment transactions rose 13% year-over-year to $6.80 billion.

As per its financial guidance, PayPal expects net revenue to increase by nearly 6.5% and 7% on a foreign-currency neutral basis (FXN) for the first quarter of fiscal 2024. Its non-GAAP earnings per share are expected to grow in mid-single digits compared to $1.17 in the previous year’s period.

For the full year 2024, the company’s non-GAAP earnings per share are expected to be in line with $5.10 in the previous year.

Analysts expect PYPL’s revenue and EPS for the first quarter (ending March 2024) to increase 6.7% and 4% year-over-year to $7.51 billion and $1.22, respectively. Additionally, the company surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive.

PYPL’s stock has surged more than 8% over the past three months.

Movado Group, Inc. (MOV)

With a $616.47 million market cap, Movado Group, Inc. (MOV) designs, markets, and distributes watches worldwide. The company offers its watches under the Movado, Concord, Ebel, Olivia Burton, and MVMT brands, along with licensed brands like Coach, Tommy Hilfiger, HUGO BOSS, Lacoste, and Calvin Klein. If your loved one appreciates luxury watches, Movado could be an exciting pick this Valentine’s.

The company has a robust capital allocation strategy. MOV paid a cash dividend of $0.35 for each share of the company’s outstanding common stock and class A common stock held by shareholders of record as of the close of business on December 12, 2023. Its annual dividend of $1.40 translates to a yield of 4.95% on the current share price. Its four-year average dividend is 4.22%.

Moreover, the company’s dividend payouts have increased at an 11.8% CAGR over the past five years.

Also, during the third quarter of fiscal 2024, Movado Group repurchased around 69,700 shares under its November 23, 2021, share repurchase program. As of October 31, 2023, the company had $18.60 million remaining available under the share repurchase program.

MOV’s trailing-12-month gross profit margin of 55.71% is 57% higher than the 35.48% industry average. Likewise, the stock’s trailing-12-month EBIT margin and net income margin of 9.86% and 8.34% are higher than the industry averages of 7.53% and 4.74%, respectively.

In terms of forward P/E, MOV is currently trading at 14.8x, 12% lower than the industry average of 16.83x. The stock’s forward EV/Sales of 0.78x is 36.7% lower than the industry average of 1.23x. Also, its forward EV/EBITDA of 7.36x is 27.3% lower than the industry average of 10.13x.

MOV’s reported net sales of $187.69 million for the fiscal 2024 third quarter ended October 31, 2023. Its net income came in at $17.67 million, or $0.77 per share, respectively. As of October 31, 2023, the company’s cash and cash equivalents were $200.97 million, compared to $186.67 million as of October 31, 2022.

Street expects MOV’s revenue and EPS for the fiscal year (ending January 2025) to increase 3.3% and 7.9% year-over-year to $689.90 million and $2.06, respectively. Also, the company has topped the consensus EPS estimates in all four trailing quarters.

Shares of MOV have surged more than 4% over the past three months and approximately 12.7% over the past nine months.

Signet Jewelers Limited (SIG)

The last stock, Signet Jewelers Limited (SIG), also tends to shine around Valentine’s Day. For those who want to go beyond chocolates, jewelry is a classic Valentine’s Day gift. Signet Jewelers, with a market cap of $4.56 billion, owns brands like Key Jewelers, Zales Jewelers, Diamonds Direct, James Allen, and Banter by Piercing Pagoda and could benefit from a surge in sales.

After all, SIG’s trailing-12-month EBIT margin and net income margin of 8.49% and 6.29% are higher than the respective industry averages of 12.73% and 32.77%. Similarly, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 29.14%, 11.39%, and 7.61% are significantly higher than the industry averages of 11.43%, 6.08%, and 4.08%, respectively.

In terms of forward non-GAAP P/E, SIG is currently trading at 10.29x, 36.4% lower than the industry average of 16.17x. The stock’s forward EV/Sales of 0.81x is 34.1% lower than the industry average of 1.23x. Moreover, its forward Price/Sales of 0.63x is 31.9% lower than the industry average of 0.93x.

In the fiscal 2024 third quarter ended October 28, 2023, SIG’s reported sales of $1.39 billion. The company reported non-GAAP operating income and non-GAAP EPS of $23.90 million and $0.24, respectively. Its cash and cash equivalents totaled $643.80 million as of October 28, 2023, compared to $327.30 million as of October 29, 2022.

“We’re reaffirming guidance for FY2024 with the full year outlook updated for the profitable and strategic sale of 15 primarily luxury watch stores in the U.K. We continue to make progress expanding gross margin through merchandise and sourcing strategies and growth in services revenue,” said Joan Hilson, Chief Financial, Strategy & Services Officer.

“Cost savings initiatives are on track and healthy inventory enables product newness as we enter the holiday season and improved free cash flow, allowing Signet to return nearly $160 million to shareholders already this year,” he added.

For the fiscal year 2024, Signet expects total sales to be in the range of $7.07 billion-$7.27 billion. The company’s operating income and EPS are expected to be $397-$437 million and $9.55-$10.18, respectively.

SIG’s stock has climbed more than 28% over the past six months and is up nearly 34% over the past year.

Bottom Line

Every year on February 14, people celebrate love with their “valentine,” and most will break the bank by buying flowers, chocolates, jewelry, and other gifts for their beloveds. Today, this event is a big business. NRF survey shows that Valentine’s Day is returning to its romantic traditions, with total spending on significant others reaching a new record of $14.20 billion this year.

Therefore, it could be wise to add the featured stocks to one’s watchlist ahead of Valentine’s Day.

PayPal (PYPL) Struggles to Rebound Means Opportunity for 3 Stocks

Posted on by The INO.com Team

Leading fintech company PayPal Holdings, Inc. (PYPL) has underperformed the market, with its stock declining more than 30% over the past year. Investor interest in the digital payments company has declined due to rising competition and innovative disruptions brought by its peers.

The pandemic was a good period for fintech companies like PYPL. The fintech companies commanded high valuations as investors’ interest in the sector rose with accelerated digital technology adoption. Fintech companies played a vital role in supporting businesses and consumers during the crisis.

However, the high-interest rate environment and growing competition within the fintech sector have hit PYPL’s fortunes lately. Competition from the likes of tech giant Apple Inc. (AAPL), which has entered the sector with financial services such as the savings account from Goldman Sachs, which offers a 4.15% APY, Buy Now Pay Later Service, contactless payments through Tap to Pay on iPhone, Apple Card, and Apple Pay have affected PYPL’s market share.

Earlier this year, PYPL announced that it would lay off 2,000 people, or 7% of its workforce, to reduce costs and focus its resources on core strategic priorities. Although PYPL surpassed the consensus revenue estimate in the second quarter, it failed to top analysts’ earnings estimates.

Its EPS was 0.3% below the consensus estimate, while its revenue beat analyst estimates by 0.2% in the second quarter. Its net revenues for the second quarter ended June 30, 2023, rose 7% year-over-year to $7.30 billion. Its non-GAAP EPS came in at $1.16, representing an increase of 24% year-over-year. Also, its total payment volume increased 11% year-over-year to $376.50 billion.

However, PYPL ended the second quarter with 431 million users on its platform, declining 2 million sequentially and 4 million year-over-year. This was the second consecutive quarterly decline in its users. The decline in users is alarming as it affects PYPL’s revenue and earnings. For the third quarter, PYPL forecasted its revenues to grow approximately 8% to reach $7.40 billion.

Also, its non-GAAP EPS is expected to grow between 13% and 14% to $1.22 and $1.24. For fiscal 2023, the company expects non-GAAP EPS to grow approximately 20% year-over-year to $4.95.

SVB MoffettNathanson analyst Lisa Ellis downgraded PYPL to ‘market perform.’ Ellis said, “Looking forward, unfortunately, we expect PayPal’s gross profit growth to remain lackluster, in the low-to mid-single digits. We see the potential for further downside to our estimates, particularly given the strong momentum of Apple Pay, which we worry will begin to benefit from the powerful network effects in payments.”

Alex Chriss is expected to take over as the company’s new CEO from September 27. The change in leadership comes during a challenging period for the company. Although the appointment holds promise, whether the new CEO can turn PYPL’s fortunes around has to be seen.

Although the global digital payments and financial services ecosystem remains well-positioned to register strong long-term growth, PYPL faces several headwinds. Amid PYPL’s current challenges, fundamentally stable financial services stocks Visa Inc. (V), Mastercard Incorporated (MA), and American Express Company (AXP) might benefit.

Let’s discuss these stocks in detail.

Visa Inc. (V)

V is a global payments technology company that enables digital payments between customers, merchants, financial institutions, enterprises, strategic partners, and government agencies. It also administers VisaNet, a transaction processing network that allows for the authorization, clearing, and settlement of payment transactions.

On June 28, 2023, V announced that it signed a definitive agreement to acquire Pismo, a cloud-native issuer processing and core banking platform with operations in Latin America, Asia Pacific, and Europe. V’s Chief Product and Strategy Officer Jack Forestell said, “Through the acquisition of Pismo, Visa can better serve our financial institution and fintech clients with more differentiated core banking and issuer solutions they can offer their customers.”

V’s revenue grew at a CAGR of 11.6% over the past three years. Its EBITDA grew at a CAGR of 12.1% over the past three years. In addition, its EPS grew at a CAGR of 14.4% in the same time frame.

V’s 51.94% trailing-12-month net income margin is 101.4% higher than the 25.78% industry average. Likewise, its 67.09% trailing-12-month EBIT margin is 238.7% higher than the 19.81% industry average. Furthermore, the stock’s 51.61% trailing-12-month levered FCF margin is 252.3% higher than the 14.65% industry average.

V’s net revenues for the third quarter ended June 30, 2023, increased 12% year-over-year to $8.12 billion. Its non-GAAP net income rose 7% year-over-year to $4.50 billion. The company’s operating income increased 21.1% over the prior-year quarter to $5.02 billion. Its non-GAAP EPS came in at $2.16, representing an increase of 9.1% year-over-year.

Analysts expect V’s EPS and revenue for the quarter ending September 30, 2023, to increase 16.3% and 9.9% year-over-year to $2.24 and $8.56 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters.

Mastercard Incorporated (MA)

MA is a technology company that provides transaction processing and other payment-related products and services. It facilitates the processing of payment transactions, including authorization, clearing, and settlement, as well as delivers other payment-related products and services. The company offers integrated products and value-added services for account holders, merchants, financial institutions, and businesses.

On May 26, 2023, MA and UniCredit announced the expansion of their payment partnership. The multi-year partnership will provide the necessary resources to achieve the shared ambition to increase the speed of innovation within the payments space and put customers at the center.

On April 5, 2023, MA announced that it was accelerating efforts to remove first-use PVC plastics from payment cards on its networks by 2028. This move reinforces the company’s sustainable efforts.

MA’s revenue grew at a CAGR of 13.3% over the past three years. Its levered FCF grew at a CAGR of 15.2% over the past three years. In addition, its net income grew at a CAGR of 11.8% in the same time frame.

MA’s 100% trailing-12-month gross profit margin is 67.9% higher than the 59.55% industry average. Likewise, its 57.14% trailing-12-month EBIT margin is 188.5% higher than the 19.81% industry average. Furthermore, the stock’s 0.63x trailing-12-month asset turnover ratio is 198.7% higher than the 0.21x industry average.

For the fiscal second quarter ended June 30, 2023, MA’s net revenue increased 14% year-over-year to $6.27 billion. Its non-GAAP net income rose 9.8% over the prior-year quarter to $2.74 billion. Its non-GAAP operating margin came in at 58.6%, compared to a non-GAAP operating margin of 57.9% in the year-ago quarter. Also, its non-GAAP EPS came in at $2.89, representing an increase of 12.9% year-over-year.

For the quarter ending September 30, 2023, MA’s EPS and revenue are expected to increase 20% and 13.4% year-over-year to $3.22 and $6.53 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters.

American Express Company (AXP)

AXP provides charge and credit payment card products and travel-related services. The company operates through three segments: Global Consumer Services Group, Global Commercial Services, and Global Merchant and Network Services. Its products and services include payment and financing products; network services; accounts payable expense management products and services; and travel and lifestyle services.

AXP’s revenue grew at a CAGR of 15.7% over the past three years. Its EPS grew at a CAGR of 26.5% over the past three years. In addition, its net income grew at a CAGR of 22.3% in the same time frame.

AXP’s 3.19% trailing-12-month Capex/Sales is 59.3% higher than the 2.01% industry average. Likewise, its 29.34% trailing-12-month Return on Common Equity is 159.7% higher than the 11.30% industry average. Furthermore, the stock’s 0.24x trailing-12-month asset turnover ratio is 12.2% higher than the 0.21x industry average.

AXP’s total revenues net of interest expense for the second quarter ended June 30, 2023, increased 12.4% year-over-year to $15.05 billion. Its net interest income rose 31.6% over the prior-year quarter to $3.11 billion. The company’s net income increased 10.7% year-over-year to $2.17 billion. Also, its EPS came in at $2.89, representing an increase of 12.5% year-over-year.

Street expects AXP’s EPS and revenue for the quarter ending September 30, 2023, to increase 19.7% and 13.6% year-over-year to $2.96 and $15.40 billion, respectively.