PayPal Holdings, Inc.

PYPL Details

PayPal Holdings, Inc. (NASDAQ: PYPL) is a global technology company that provides platform and digital payments services that facilitate consumers and merchants to make and receive payment, withdraw, and transfer funds from bank accounts, and to hold balances in its proprietary accounts in various currencies. Its revenues are categorized into 1) Transaction Revenues, which refers to fees levied on users for Total Payment Volume (TPV) of each completed transaction on its platform, and 2) Revenues from other value-added services, which includes revenue earned through partnerships, referral fees, subscription fees, gateway fees, and other services offered to users. The company derives most of its revenues from the United States.

Introducing Omnichannel Solution for Small Businesses: On June 30, 2021, PYPL announced the launch of PayPal Zettle in the US. It is a digital point-of-sale service that allows small businesses to sell across physical and online channels. It enables them to manage sales, inventory, reporting, and payments in one place. Merchants will also be able to use PayPal suite of payment and commerce solutions, including invoicing and PayPal's Business Debit Card.

Q1FY21 Results: PYPL reported total revenue of USD 6.03 billion for Q1FY21 (ended March 31, 2021) compared to USD 4.62 billion in Q1FY20, registering a growth of 30.65% YoY. Transaction Revenue segment, which accounted for 93.17% of the total revenue in Q1FY21, improved by 33.36% YoY, primarily driven by a 49.79% YoY increase in TPV. The impact of the strong performance of the topline percolated down to the company's operating performance, wherein it reported an increment of 161% YoY in its operating income to USD 1.04 billion in Q1FY21 as compared to USD 398 million in Q1FY20. The operating margin improved by 865 bps to 17.27% in Q1FY21 compared to 8.62% in Q1FY20. Net income surged twelvefold in Q1FY21 to USD 1.10 billion from USD 84 million in Q1FY20.

Key Risks: PYPL operates in a highly competitive global payments industry; any advanced innovation or superior product development by its competitors could impact its operations. Furthermore, PayPal's business is subject to strict federal and state regulations. As a result, stricter regulatory oversight could impair its profitability.

Outlook: In FY21, PYPL expects to generate revenue of ~USD 25.75 billion, thus realizing YoY growth of ~20% and ~18.5% on spot rate and FX-neutral (FXN) basis, respectively. The revenue guidance rides on the company's projection to add 52-55 million Net New Active (NNA) Accounts and achieve TPV growth of ~30%.  It also estimates an EPS of USD 3.33 and USD 4.70 on a GAAP and Non-GAAP basis, respectively, in FY21.

 Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PYPL Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: PYPL stock price has increased 22.91% and 47.84% in the past 6 and 9 months, respectively, and is currently leaning towards the higher band of the 52-week range of USD 164.33 to USD 309.14. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 69.70. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 266.95. Considering the significant uptick in the stock price, we believe the current share price sufficiently reflects the company's strong track record and growth potential and have chosen to remain on the sidelines. Therefore, we recommend an "Expensive" rating on the stock at the current price of USD 301.01, down 0.06% as of July 14, 2021, at 01.19 PM ET.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

NU Skin Enterprises, Inc.

NUS Details

Nu Skin Enterprises, Inc. (NYSE: NUS) is a multi-level marketing (MLM) company that develops and distributes personal care and wellness products under the "Nu Skin", "Pharmanex", and "ageLOC" brand names. Its operating segments are 1) Nu Skin, which distributes products in seven geographies, including China, South Korea, Southeast Asia, the Americas/Pacific, Japan, Hongkong, and the EMEA region, 2) Grow Tech, which is focused on developing controlled-environment agriculture technologies, and 3) Manufacturing, which includes NUS' manufacturing and packaging subsidiaries. As of July 14, 2021, the company's market capitalization stood at USD 2.77 billion.

Enhancing U.S. Lamb Production Through Sustainable Solutions: On July 12, 2021, Grov Technologies, a wholly-owned subsidiary of NUS, entered into an agreement with Superior Farms for the sale of 10 Olympus Tower Farms for the latter's Sheep Discovery Center. These tower farms will produce High-Density Nutrient (HDN) Superfeed wheatgrass throughout the year to aid farmers in increasing the size and improving the quality of their flock. 

 Q1FY21 Results: The company reported a 30.69% rise in net revenue to USD 677.03 million in Q1FY21 (ended March 31, 2021) as compared to USD 518.03 million in Q1FY20, attributable to YoY growth of 100.43% and 115.18% in Americas/Pacific and EMEA region, respectively driven by significant increase (~100%) in customers and sales leaders in both the regions. NUS' operating income reported a growth of 72.06% YoY to USD 62.91 million in Q1FY21 vs USD 36.57 million in Q1FY20, with a 223 bps improvement in operating margins. In addition, the company reported an increase of 140.40% YoY in net income to USD 47.43 million in Q1FY21, in contrast to USD 19.73 million in Q1FY20.

Key Risks: Government regulators such as the US Federal Trade Commission scrutinize and question NUS since it is a multi-level marketing firm. If new rules and regulations are enacted that restrict direct selling, the company's income and profitability may suffer. In addition, the company is becoming increasingly dependent on social commerce, and social media platforms may at any time decide to prohibit, block or decrease the prominence of NUS' sales content for any reason, which could impact its revenue and financial position.

Outlook: As of Q1FY21, the company outlined that it expects to clock revenue in the range of USD 680 – 705 million in Q2FY21, representing 11% - 15% YoY growth. EPS is estimated to range between USD 0.97 – 1.07. For FY21, NUS anticipates generating USD 2.80 – 2.87 billion revenue, achieving YoY growth of 9%-11%, together with an EPS of USD 4.05 – 4.30.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

 (Data Source: REFINITIV, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

NUS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: NUS stock price has increased by 4.08% and 20.9% in the past 3 and 12 months, respectively, and is currently leaning towards the higher end of the 52-week range of USD 42.94 to USD 63.85. The stock is currently trading between its 50 and 200 DMA levels, and its RSI Index is 37.71.  We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 47.75. Considering the uptick in the stock price, we believe the current share price sufficiently reflects the company's strong track record, growth potential and dividend payout, and have chosen to remain on the sidelines. Therefore, we recommend an "Expensive" rating on the stock at the closing price of USD 55.12, down 0.34% as of July 14, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.