All they do is payments processing, and they don’t even do a lot of it. They process about $180B a year. By contrast, Chase processes approximately $6 Trillion and they’re market cap is $300B. However, they also have an investment bank, commercial bank, consumer bank, etc. Stripe has none of that. Wells Fargo, which processes about $3 Trillion, is valued at $90B. But they also have many other revenue generating groups. Goldman and Morgan Stanley, which do not have payments processing, are valued at $70B and $90B. In what world is a company with 1300 employees more valuable than well established banks that could run circles around stripe?
Thats not how it works. Amazon had a competitve advantage over its competitors who sold books and other goods, namely internet technology. In other words, they were a pioneer and they executed well. Stripe though, they are in the payment processing arena, but what is their competitive advantage? For example, vs Visa, Mastercard, Chase, and other big banks who are ALSO investing a lot in technology? You could say "people" but that is subjective.
I see - Can you expand on what areas stripe is blazing the trail in?
Tech over indexes on future potential as opposed to current value. I think the idea is that they are positioned well for the continuing e commerce boom. Tech Twitter wants to get in on investment action but the doors are closed to everyone except big players
we do a lot more than payment processing
like ?
Go to our website lol
Why do you think Paypal is worth 237 billion? From my understanding they have a suit of products that is turning Stripe into an enterprise product for payments. There is still a lot of untapped potential in this space.
They’re not - they’re trading at an 85 PE, while banks are at a 10
Enterprises is the lowest margin segment in payments. Good luck negotiating with the likes of Amazon, Walmart, or Netflix 👍
Acquiring businesses like Stripe tend to get squeezed between the networks (Visa, MC, etc) and the issuing banks. It’s not a great business to be in as margins are squeezed over time. Players like Chase, that are both large issuers and acquirers have leverage with the networks and will win in this business over the Stripes of the world. Stripe has to use their position to get away from card payments to justify this valuation
The Collisons and investors are much smarter than an average Joe like you and me. I am sure they are thinking and working on how to remove Visa / MasterCard from the equation by running their own network - and they have the volume to do so. Stripe cannot be compared to PayPal and Square simply because they both have a healthy consumer business (especially Square). And all tech stocks are high compared to a sector like bank. That is just the reality and unlikely to change anytime soon.
Over 3k employees
https://notboring.substack.com/p/stripe-the-internets-most-undervalued-ec3 gives a good overview why Stripe isn't "just" payments processing
PE is not the best indicator to value growth companies. Discounted future cash flow is a better method. PayPal, Square and Adyen are a few public comparisons to get an idea. Out of the 3, I think Adyen is the closest. It is useful to look at their financials and understand whether their valuation makes sense.
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I think Stripes central business is really solid and gives them a good base to build more internet commerce businesses. I also think Patrick and John are very good at what they do. So if Stripe has a path to being 100B+, they have a good shot of finding it.
Banking is highly regulated. They can swim under the radar now because they’re quite small. However, when they get bigger, they well have to be regulated and that means lower profits as they’ll need significantly more people. What is their plan to do increase business? Is it all finance or is it outside finance?