Hedge fund titan Daniel Loeb is ready to anoint PayPal as the next Amazon or Netflix, revealing to investors in his hedge fund Third Point Management that it acquired a position in the online financial transaction company.
Since 1998, PayPal has been an innovator in facilitating online financial transactions as opposed to the traditional paper methods, such as checks and money orders. It serves as a payment processor for online vendors, auction sites like eBay and other commercial users.
“Consumers love PayPal because it enables hassle‐free, one‐touch checkout across millions of online merchants,” Loeb told investors in a note. “We see parallels between PayPal and other best‐in‐class internet platforms like Netflix and Amazon: high and rising market share, untapped pricing power, and significant margin expansion potential.”
As of 3:00 p.m. ET, PayPay (PYPL) was up almost 2%, trading at $89.22. The stock is up over 50 percent within the past year and up 21% year-to-date.
Loeb was quick to point out to investors that PayPal has 237 million active accounts as well as 19 million merchants–a user base that is ten times that of its competitors. Furthermore, Loeb is betting that PayPal will exceed earnings per share expectations and that its share price will touch the $125 price mark within 18 months.
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“PayPal is just scratching the surface on pricing power: the company recently shifted away from a ‘one‐size‐fits‐all’ approach in merchant contracts to a dynamic pricing model that reflects the value‐add of a growing suite of products,” said Loeb.
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