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PayPal (PYPL), Western Union (WU) Double Performance of Broader Tech

Published 03/08/2016, 07:54 AM
Updated 07/09/2023, 06:31 AM


PayPal Markets Itself as New Money and Outperforms Anemic Tech Sector

PayPal (NASDAQ:PYPL) has certainly been playing it relatively cool since its split from eBay last year. They had a fantastic advertising campaign for the SuperBowl that branded them as the critical component to “new money”, which is a great play on the same term used to describe self-made wealthy individuals; even if they are sometime known to be flashy and smug. So far PayPal’s (PYPL) share price is up 8% this year, hovering around $38.98 with a market cap of $47.68B.

Smart Acquisitions and New Currencies

In a tech market that has been outperformed by the S&P 500 year-to-date and is currently down more than 5% since the start of the year, an 8% gain in a tech stock looks incredibly healthy. Part of PayPal’s (PYPL) magic, as I discussed previously, was in their acquisitions of both Braintree and Venmo. This has insulated them from the liability involved with offering virtually free money transfers on mobile platforms, and Braintree has a gigantic reach into merchant transaction processing; even pushing the boundaries by opening up their terminals to support Bitcoin, if merchants choose to enable the feature.

Western Union (WU) Inks International Deal

Another financial services tech company that gets taken for granted is Western Union (NYSE:WU), up 8.91% YTD. Western Union (WU) has invested heavily in taking their traditional business, centered around local independent agents, and moved it online. They’ve even been competing with PayPal in the prepaid debit card space; offering customers the ability to spend the funds transferred to them automatically, as soon as the transfer clears. Their strength is the physical presence they have internationally, something PayPal noticeably lacks in their online business model.

Western Union has also rapidly expanded their international logistics, recently inking a very well-received deal with Thomas Cook India (NS:THOM) and DCB Bank. Business intelligence shows us that interfacing with outside partners around the globe while strengthening in-house assets is the key to strong global growth.

PayPal (PYPL), Skrill (Privately Held), and Interac (Privately Held) Among Favorite Transaction Servicing Providers in Canada

To be fair, PayPal also has a strong international presence. They’ve added 100 jobs at their campus in Dublin, and they’ve been recognized as one of the preferred Canadian online casino banking methods. The online casino business is booming, and its growth in Canada has necessitated new universal payment servicing for both physical and virtual gaming. Interac is one of the largest players in Canada, providing debit cards to most Canadian citizens through a partnership with 5 major banking institutions; forming a near monopoly on debit card issuing and processing. Skrill (privately held) recently acquired uKash, another major player in online transaction processing throughout Europe.

For PayPal and Western Union, achieving market penetration in international banking systems is crucial to their long-term growth. Their strong, steady performance has been rewarded in the markets, as other tech stocks falter.

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