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May 18th, 2022 | 14:01 CEST

wallstreet:online, Block Inc., PayPal - Is the mood turning?

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One sector that has made strong gains in the stock market boom of recent years has been FinTechs and financial services providers. Financial portal operators and neobrokers such as wallstreet:online and Smartbroker were among the beneficiaries, as was the payment service provider PayPal. The share price of Block Inc., the mobile payment provider originally launched under the name Square Inc., also climbed to dizzying heights. After a sharp correction, things could now be on the up again with the tailwind of good figures.

time to read: 3 minutes | Author: Carsten Mainitz
ISIN: WALLSTREET:ONLINE INH ON | DE000A2GS609 , Block Inc. | US8522341036 , PAYPAL HDGS INC.DL-_0001 | US70450Y1038

Table of contents:

    wallstreet:online - Strong figures, new growth stage to ignite soon

    With Smartbroker, wallstreet:online AG is the leading German neobroker by assets under custody. In addition, the Berlin-based Company is also by far the largest publisher-independent operator of financial portals and shareholder communities in the German-speaking world. With this dovetailing, wallstreet:online has a significant unique selling point.

    Like most FinTech stocks, the shares of the Berlin-based Company have come under pressure in recent months. The final figures for the past fiscal year, which have just been presented, prove that these discounts are not justified. Revenues increased by 82% to EUR 51.4 million in 2021. The majority of revenues still come from the core media business, but soon the brokerage segment will dominate.

    The number of page impressions climbed by around 15% to almost 4 billion, while Media segment revenue increased by 30%. The number of Smartbroker customer custody accounts increased to nearly 250,000, bringing assets under custody to around EUR 8.8 billion. However, the segment is still in the red due to high investments.

    The Company says it expects a 25% increase in sales for the current year. The focus is on the launch of Smartbroker 2.0 in the second half of the year, intended to reach additional target groups by dovetailing with the Group's new crypto offering. The launch of a smartphone app is also planned. Until the relaunch, the Company is scaling back its marketing activities. This should be reflected in the number of newly opened securities accounts in the first half of the year. In addition, the Company has applied for an extension of its BaFin license, which will allow it to expand its business activities. Analysts consider the stock to be significantly undervalued and see doubling potential.

    Block Inc. - Mixed figures

    The payment service provider Block Inc. (formerly known as Square Inc.), launched by Twitter inventor and serial founder Jack Dorsey, recently published its first-quarter figures. At first glance, these can at best be classified as "mixed". For example, revenue dropped significantly by around 22% to USD 3.96 billion, much more than analysts had expected (USD 4.15 billion). That was due to the slump in the high-revenue but low-margin Bitcoin business, whose revenues halved to USD 1.73 billion.

    Excluding the Bitcoin business, revenue would have increased by a remarkable 44% to USD 2.23 billion. Adjusted EBITDA, at USD 195 million, was much higher than analysts' average forecast of USD 136 million.

    The stock market again took a positive view of the Company's disclosures on the development of its mobile service "Cash App". This area continued to perform very positively and most recently grew by 15% compared to the respective previous month. These figures do not yet take into account the positive effects of the multi-billion dollar acquisition of the Australian payment services provider Afterpay at the beginning of the year. In addition, Block has so far not seen any negative effects of rising interest rates or high inflation on the payment behavior of its customers.

    PayPal - Multiple stress factors

    PayPal, the original FinTech company co-founded by Elon Musk, is also struggling with a sharply declining share price. Meanwhile, the decline from the all-time high of July 2021 was around 70%. The recently published business figures should not contribute too much to the recovery for the time being. Sales were up a meager 7%, and adjusted earnings fell 28% to USD 0.88 per share.

    Management cited disruptions in global supply chains due to the Corona pandemic, the Ukraine crisis and the effects of high inflation as reasons. It also said the Company had to contend with the loss of a high-revenue major customer with the termination of its relationship with eBay.

    However, the latter did not come as a surprise to PayPal. eBay had already turned to the payment service provider Adyen as a new partner since 2018. However, the implementation of the partnership was now faster than initially anticipated. Without eBay, PayPal's revenue would have grown by 15% in the last quarter, and adjusted earnings would have fallen by only 11%. On a positive note, analysts and investors noted the announcement that the effects of the elimination of the eBay business would be concentrated in the first quarter.

    The FinTech sector remains challenging. Nevertheless, in many cases, the outlook is better than the current share price level would lead us to believe. If Block Inc. reduces its dependence on bitcoin or the bitcoin price rises strongly, a price recovery can be expected soon. PayPal is also currently valued quite favorably. Soon, the loss of the eBay business should be digested. wallstreet:online has excellent prospects. The extension of the BaFin license and the launch of Smartbroker 2.0 promise an exciting second half of the year. In addition, the share is significantly undervalued, according to analysts.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

    Risk notice

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    Der Autor

    Carsten Mainitz

    The native Rhineland-Palatinate has been a passionate market participant for more than 25 years. After studying business administration in Mannheim, he worked as a journalist, in equity sales and many years in equity research.

    About the author

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