Buylyst

Published on 07/27/21 | Saurav Sen | 3,432 Words

The BuyGist:

This is our original Paypal Thesis from February 2020, just before the pandemic took full flight.
We're re-posting this as an article to lend some context and color to our updated Paypal Thesis.
This is a re-posting of our thesis in the old format.
Updated Thesis in new format is available here for subscribers.

Thesis and Summary

Paypal started the cardless movement and is now competing with many “newbees”. But it remains a dominant company that’s aiming to be a “network-of-networks”, which could significantly increase revenue as cash flow in the next 2 years.

Core Competency: Technology to make digital payments cardless, frictionless.
Product Differentiation? Need more. Aiming to become the “network of networks”.
Revenue Growth? Solid. 20%-ish a year, due to growth in number of Active Users.
Competition/Threats? Card Networks, Banks, Neobanks, Big Tech firms.
Economic Moat? Inherent nature of product discourages switching; plus Network Effects.
Strategy? Good. Thinking in terms of ecosystem to widen Moat. But too acquisitive.
Return on Equity? Mid-teens. Need to find a way to improve margins.
Sustainable Free Cash Flow? About $7 billion. Translates to roughly $120 per share.