Earlier this summer, we celebrated the 10-year anniversary of the iPhone.
That was a big deal, as that smartphone is one of the top-selling gadgets of all time. It revolutionized mobile computing and basically took the world by storm.
Everyone talked about it – and we’ll likely see a new anniversary-themed iPhone before the end of this year.
There’s another tech-business anniversary coming up, but no one seems to be talking about this one.
When Amazon.com Inc. (Nasdaq: AMZN) launched its 1-Click buying feature on Sept. 12, 1997, it changed forever the way consumers buy everything from books to laundry detergent.
Other websites force shoppers to go through a complex and frustrating payment process that limits sales. But Amazon customers can check out in a matter of seconds.
To me, that makes 1-Click the crucial innovation in the history of e-commerce.
Now lean in… because I want to quietly reveal something else no one else seems to be talking about.
Amazon’s 1-Click patent expires in less than a month.
And that will be a heck of a catalyst for whoever capitalizes on this little-known fact.
After all, e-commerce is worth $2.3 trillion a year. Any slice of that pie taken from Amazon would be huge for those firms – and their investors.
Of course, a slew of fintech firms and e-retailers firms are feeling greedy.
But there’s only one single best way to play this historic anniversary.
And today I’m going to reveal it…
Amazon Will Be Fine…
Now then, this is no reason to dump Amazon.
CEO Jeff Bezos’ team up in Seattle has kept up a steady stream of innovations such as Amazon Web Services, Prime, Amazon Video, and even a smart speaker that aids shopping and one-day delivery.
Not only that, but it owns the 1-Click trademark, meaning nobody else can call their service that. But after Sept. 12, everyone else can start using the underlying technology.
Don’t underestimate the value of this feature. Last year, Amazon sales rose 27%, to roughly $136 billion. If 1-Click only accounted for 10% of those sales, that’s $13.6 billion in revenue right there.
No wonder digital payments firms are chomping at the bit. They see a global e-commerce sector that research firm eMarketer says will be worth $4 trillion by 2020, a roughly 70% increase from this year’s level. And they see the exponential growth in mobile commerce, which Gartner says could account for 50% of online orders over the next several years.
In other words, a digital payments firm that can pounce on the demise of Amazon’s 1-Click patent faces a huge upside for years to come…
But This Player Will Do Even Better
That’s why I think savvy tech investors like you should look at PayPal Holdings Inc. (Nasdaq: PYPL). This is a firm that has come a long way in a few short years.
PayPal has emerged as a leading global platform for online money transfers – and often is used in place of checks or money orders. Hundreds of thousands of businesses now use the PayPal platform to process payments with clients and vendors and conduct online auctions.
The firm really thrived under the tutelage of eBay Inc. (Nasdaq: EBAY), which owned PayPal from 2002 through 2015. In that time, PayPal became the most popular way to pay for goods bought on that auction site.
By 2010, PayPal had more than 100 million active user accounts in 190 markets through 25 different currencies. Today, we’re talking about 170 million active accounts handling roughly $400 billion every year.
That 2015 spinoff from eBay that brings up a key point. Once spun off from a larger parent, firms like PayPal can really thrive.
A study by Lehman Brothers of 88 spin-offs found that they beat the S&P 500 by an average of 45% in their first two years as independent companies. PayPal is doing even better than that. Its shares are up 58% in the past two years, while the S&P 500 is up just 17%.
Then again, PayPal has surely shown a new level of ambition now that it’s flying solo…
Single and Loving It
And so far in 2017, PayPal has signed deals with Alphabet Inc. (Nasdaq: GOOGL), Discover Financial Services Inc. (NYSE: DFS), Wells Fargo & Co. (NYSE: WFC), JP Morgan Chase & Co. (NYSE: JPM), Bank of America Corp. (NYSE: BAC) and Samsung Electronics Co. Ltd. (OTC: SSNLF).
In 2015, PayPal embraced the trend toward simpler checkout schemes, launching One Touch, with which clients can send funds with just one click, once their log-in info has been stored.
In the most recent quarter, PayPal tallied 61 million clients now using the One Touch feature, and adoption is quickly rising.
This is part of a broader wave of innovation that has made PayPal just as important on our smartphones as it has been on our desktops.
Fact is mobile is the fastest growing part of the business. In the second quarter, mobile payment volumes shot up 50%, to around $34 billion, and now represent around one-third of all transactions.
PayPal knows that younger consumers prefer to use their smartphones to send and receive money. That’s why the firm bought hot tech upstarts Xoom and Venmo in over the past couple of years. Under PayPal’s leadership, they are thriving. Venmo, for example, saw a 103% spike in transaction volume in the second quarter, to $8 billion.
PayPal continues to bring in the right tools to strengthen its platform. This past February, the firm paid $233 million to acquire TIO Networks, which helps clients pay their utility and cable bills at kiosks in locations like drug stores.
And earlier this month, PayPal shelled out an undisclosed sum to buy Swift Financial, a small-business lender. That should strengthen the PayPal Working Capital division, which has already provided more than $3 billion in short-term funding to more than 115,000 small businesses.
PayPal sees a massive new niche emerging here…
A Key Hire and Robust Growth Ahead
That’s why PayPal hired Mark Britto in July. Britto was the senior vice president of worldwide services and sales at Amazon, where he emerged as one of the e-commerce industry’s top young execs.
Lending to consumers and small businesses has become quite profitable, despite the risk. PayPal made around $280 million in this area last year, and it’s one of the fastest-growing profit centers for the firm.
As I said, PayPal is quickening its pace of innovation now that it’s a standalone company. The flurry of deals with credit card and tech firms inked in the past 18 months, for example, is part of the firm’s new “Choice” initiative.
On a fast-rising number of third-party sites, more consumers are opting for PayPal when it is presented as a payment option alongside Visa, Mastercard, and other options.
And that’s helping the firm to grow far faster than the broader financial payments industry.
In the second quarter, PayPal saw a 20% increase in revenue and a 26% gain in payment volumes, beating earnings forecasts.
Shares of PayPal are trading around $60, and the firm is valued at $72.91 billion.
I’m looking for nearly 25% profit growth this year – and share-price gains around the same range.
But that estimate is just for the next 12 months or so. If you have any kind of time horizon at all, this is a stock that’s just getting started. It’s one you should look to accumulate – picking up shares “on the dip” or whenever you have a bit of spare change lying around.
This is truly a fast grower that you can use to finance your retirement fund… your grandkids’ college education… or even that bass boat you’ve had your eye on.
Happy anniversary 1-Click! We’ll enjoy doubling our money in less in four years thanks to Amazon’s loss.
See you all back here Friday.