PayPal Holdings (PYPL, Financial) detracted from performance during the fourth quarter, despite reporting metrics that show its platforms are thriving. The total volume of payments that PayPal proprieties handled grew +26% compared to 2021 and is now over +70% higher than in 2019. In addition, new accounts at PayPal properties grew +12% while PayPal users executed +10% more transactions than last year. PayPal’s one-time parent and former largest customer, eBay, now represents just 3% of the Company’s payment volume as PayPal has aggressively expanded its platforms to include e-commerce merchants of all sizes. This includes Amazon, which announced it will accept payment at checkout from PayPal’s Venmo starting in 2022. Last, index providers S&P Dow Jones and MSCI, announced the potential re-constitution of their equity indexes, including changing the sector classification of payment processors, such as PayPal (and Visa), from “Information Technology” over to “Financials.”2 We are benchmark agnostic; however, we believe the potential change to this market structure particularly within passive index exchanged-traded funds, likely added to volatility during the quarter.
From David Rolfe (Trades, Portfolio)'s Wedgewood Partners fourth-quarter 2021 letter.
