Timothy Parton, portfolio manager of the JPMorgan American Investment Trust (JAM), discusses the reasons he holds PayPal (US:PYPL).
It is often said that technology has changed our world. It really shows itself when we look at something as simple as shopping, or even cash. Growing up, when our parents wanted to buy groceries or clothes, they generally went to a shop and paid for their items using cash. Or at least they did in my house!
Fast forward to today, the younger generation hardly ever uses cash and, as for shopping, a lot of it is done online. This trend towards a cashless society has really taken off during lockdown. As we adopt more technology, cash seems to be going the way of the chequebook, hardly used and replaced by electronic payments. As investors, we have the ability to tap into this industry trend.
PayPal is a name that sits at the intersection of both e-commerce and digital payments. For many of us, our first awareness of PayPal is when we’re purchasing items on eBay. Today, PayPal has leveraged its first-mover advantage to become the preferred and trusted payment processor for e-commerce and has also expanded its reach to be part of your digital wallet. PayPal is accepted at more than 20m merchants and has over 300m active users.
Digital commerce is expected to approach $5 trillion (£3.8 trillion) in value by 2021 as online continues to take share from offline commerce, according to eMarketer. Covid-19 has accelerated the shift to online and global e-commerce is growing at high double-digit rates.
We view PayPal as one of the most exciting stories in the payments universe. On the fundamental side, the company delivers strong organic growth and has very high exposure to e-commerce. PayPal also has a strong brand with global reach.
Shopping online and paying for things electronically has become a new daily ritual for many of us. Just as, once upon a time, the corner shop and using cash was the norm, e-commerce and digital payments are fast becoming the new normal.
