PayPal: The Bank Charter Changes Things, But I Still Remain Bullish
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Dilantha De Silva12.77K FollowersFollow5ShareSavePlay(12min)Comments(3)SummaryPayPal Holdings, Inc.’s recent application for a bank charter directly contradicts the asset-light argument that underpinned my September upgrade—I analyze whether this strategic pivot breaks the bullish case.While the market fears balance sheet risk, securing an ILC charter would allow PYPL to capture a funding cost arbitrage on SMB loans that could structurally reset operating margins higher.The Apple Playbook of aggressive capital returns now faces a major hurdle. I detail how new regulatory capital requirements will impact the pace of PYPL share buybacks and short-term ROE.Investors must now grapple with the risk of PYPL stock being de-rated to a bank multiple, but I explain why this transition ultimately reinforces my Buy rating at 11.3x forward earnings. chameleonseye/iStock Editorial via Getty Images Investing in stocks is inherently exciting because it keeps us on our toes. Although buying and holding stocks for a long period of time is a tried and tested strategy, it doesn't mean that active investorsThis article was written byDilantha De Silva12.77K FollowersFollowDilantha De Silva is an experienced equity analyst and investment researcher with over 10 years in the investment industry. He writes insightful articles for Seeking Alpha, GuruFocus, TipRanks, and ValueWalk, with a significant following on Seeking Alpha. Dilantha’s expertise spans across various sectors, with a particular focus on small-cap stocks that are overlooked by Wall Street analysts. He is a CFA Level III candidate and holds qualifications from the Chartered Institute for Securities and Investment (CISI). Dilantha has been featured on CNBC and Bloomberg, and his work has been prominently showcased on Nasdaq, Yahoo Finance, and other leading investment platforms. When not analyzing stocks and writing, Dilantha is involved in private equity transactions, including acquiring and managing businesses.Analyst’s Disclosure:I/we have a beneficial long position in the shares of PYPL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.