What do a leading fintech player, a mobile communications company and a key supplier to the bioprocess industry have in common?
The companies in question are Pay Pal (NASDAQ: PYPL), Digital turbine (NASDAQ: APPS), and Repligen (NASDAQ: RGEN), and they have all gained ground in the midst of the pandemic – and in the long run, all have become dominant players in their respective niches. These fundamentally strong companies are riding favorable structural winds and appear to be long-term buy and hold gems.
The pandemic has accelerated the growth of e-commerce and digital payments in 2020, which has given PayPal a major boost. The company added 72.7 million new net accounts in 2020, with an increase in total payment volume (TPV) of 31% to $ 936 billion, which pushed revenue by 21% to 21.5 billion of dollars. Net income also rose 71% to $ 4.2 billion, and free cash flow increased 48% to $ 5 billion. With the company forecasting POS growth of around 20% and revenue growth of 19% for 2021, its future looks bright.
Beyond its core online payment business, the fintech leader has launched several cashless payment features for in-store purchases, including contactless payment, charge cards and QR codes. Currently, PayPal payment options are accepted by over 600,000 retailers. As traders experience double-digit increases in average basket size from customers using QR codes, expect more sellers to start accepting them. In 2020, nearly 10 million customers used PayPal’s services to make in-store purchases worth more than $ 20 billion. Management has forecast that the in-store retail purchase market will be worth $ 8 trillion by 2025.
In 2020, PayPal introduced features such as “buy now, pay later”, bill payment, direct deposits, and check cashing to its PayPal and Venmo wallets. The “buy now, pay later” option has already been used by 3 million customers and accounted for $ 750 million in POS in the full first quarter after its launch. The company also allows individuals to buy, sell and hold cryptocurrency through their PayPal accounts – and it plans to allow them to use cryptocurrencies to make purchases at its 29 million merchants this year.
PayPal stock has already gained over 140% last year. However, it is a rock solid, centuries-old growth story that can continue to reward investors for many years to come.
2. Digital turbine
Digital Turbine acts as an intermediary between advertisers, Android mobile original equipment manufacturers (OEMs) and mobile operators. It helps advertisers place their apps on the phones of partner OEMs and carrier networks, either preloading them into new devices or suggesting them to users later based on their specific interests. The company’s Single Tap technology has further improved the chances that users will install recommended apps.
Digital Turbine has already installed its core software platform, DT Ignite, on more than 570 million mobile devices. In its third quarter of fiscal 2021, which ended Dec.31, the company added 65 million devices, a year-over-year increase of more than 50%. Most of this growth has come from international markets, but some has also been attributed to the 5G-focused upgrade cycle in the United States. These favorable winds will continue to stimulate its growth.
Digital Turbine’s targeted advertising strategy has resulted in increased consumer engagement and better ROI for advertisers. The company’s revenue per device grew year over year by more than 25% in the United States and more than 65% in international markets in its fiscal third quarter. Network effects have also created a solid rift. Beyond its application media revenues (from DT Ignite and Single Tap), the company’s content media products have diversified its revenue base and increased its margins.
In the fiscal third quarter, Digital Turbine’s revenue jumped 150% year-over-year to $ 88.6 million. Almost half of this revenue is recurring in nature and comes primarily from the content media industry. The company’s adjusted net income also climbed 300% year-over-year to $ 20 million. It also has a strong balance sheet with $ 43.7 million in cash and $ 19 million in debt.
Digital Turbine is currently trading at a futures price / earnings multiple of 88.7 which is rich. However, given that the company has penetrated less than 16% of the 3.6 billion smartphone users, it still has plenty of room for growth. This is a multi-year opportunity and investors can reap significant returns from this stock, even if they invest in it at these high levels.
Repligen provides technologies, systems and consumables to the bioprocess industry. The company has become a dominant player in filtration and prepackaged chromatography – processes used to purify and improve yields of biologics during bioprocessing. Recently, Repligen entered the field of process analysis, developing technologies that take real-time measurements of proteins, plasma DNA, and nucleic acids while bioprocessing is in progress.
The rapid pace of clinical development and commercial scale production of biologics, gene therapies and cell therapies, as well as COVID-19 vaccines and therapeutics, has dramatically increased the demand for bioprocesses. Repligen has estimated its total addressable market at $ 3.7 billion, which is only part of the global bioprocess market of $ 12 billion.
The company’s offerings are ideally suited for single-use type manufacturing and continuous manufacturing, two major trends that are expected to make bioprocessing more flexible, less susceptible to contamination and more productive. The company is prioritizing expanding its capabilities and increasing penetration into gene therapy bioprocessing in 2021.
In 2020, Repligen’s revenue increased 36% to $ 366 million. Its gross margin was 57.6%, while its Adjusted EBITDA margin was 29.4%. For 2021, management now forecasts annual revenue growth of 37% to 43%, gross margin of 57% to 58% and adjusted EBITDA margin of 30% to 31%.
Trading at a futures P / E multiple above 91, the stock doesn’t come cheap. Repligen also competes with larger players such as Danaher (NYSE: DHR), MilliporeSigma et Thermo Fisher (NYSE: TMO). However, despite competitive pressures, Repligen has managed to make its mark. With a market capitalization of just over $ 11 billion, this high-growth company could also become an attractive recovery target in the years to come. The stock gained over 130% last year, and it has the potential to rise even higher in the coming decade.