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Stripe’s IPO is one of the most anticipated public offerings of the decade. But will Stripe stock be a buy?
Let’s find out in this Stripe Stock Forecast and Analysis.
Stripe Stock: Background
Stripe is a financial technology company that builds economic infrastructure for the internet.
It was founded by Irish entrepreneur brothers John and Patrick Collison in 2009 and became part of the Ycombinator program.
Stripe’s software and suite of APIs (application programming interfaces) are unlocking the potential of the digital economy and “increasing the GDP of the Internet”.
Stripe is the most valuable private fintech company in the world.
Stripe Stock Investment Potential
#1. Toll Collectors of the Internet
Stripe is the toll collector of the Internet — if a transaction occurs online, Stripe is getting a piece of the pie.
Stripe facilitates a large majority of transactions that occur online. It collects a 2.9% swipe fee and 30 cents per transaction.
We are still in the early stages of digitization, especially when it comes to payments. Expect Stripe to lead and benefit from the merging of the physical and digital worlds.
#2. The Online Economy
Even with the rise of companies like Amazon, Shopify, and Airbnb (ABNB), only 3% of global commerce happens online.
Stripe controls the majority of that 3%, but the online economy still has massive room for growth.
Imagine what happens to Stripe’s bottom line when the balance between digital and physical commerce begins to shift towards the former.
We do not expect this shift to be linear; like most innovations, the initial change is gradual, and then the adoption is rapid, appearing to happen “all at once”.
Stripe has partnered with millions of companies in over 120 countries, from startups to the world’s largest companies. They trust Stripe to start, run, and scale their businesses.
Stripe has embedded itself into the fabric of the world’s most successful companies. Here are some of the most notable partnerships:
- Amazon (AMZN)
- Shopify (SHOP)
- Zoom (ZM)
- Salesforce (CRM)
- Uber (UBER)
- Peloton (PTON)
- Lyft (LYFT)
- DoorDash (DASH)
- Slack (acquired by Salesforce)
- Nasdaq (NDAQ)
- Spotify (SPOT)
- Zillow (Z)
- Target (TGT)
- Affirm (AFRM)
- American Cancer Society
Stripe’s simplicity is its differentiator; its products make adding payment railways to businesses easy.
In addition to Fortune 500s, Stripe powers the kinds of companies that couldn’t exist even ten years ago by providing new models like crowdfunding, on-demand apps, and marketplaces.
#4. Pivoting into New Markets
Stripe continues to add new platforms and products that are generating massive demand from businesses of all types.
It recently launched a banking service called “Stripe Treasury” that offers bank accounts to customers who use Stripe’s platform.
Goldman Sachs, Citigroup, Barclays and Evolve Bank & Trust partnered with Stripe for this launch.
This is just one example of Stripe expanding its reach. It has the customer base and distribution to enter new markets and bully niche fintechs.
#5. Stripe the Venture Capitalist
These pivots are made possible by Stripe’s aggressive venture arm — the company is active in the VC space and has participated in several funding rounds recently.
By embracing (acquiring) new technologies, Stripe can stay ahead of the innovation curve and partner with the very best niche fintechs worldwide.
Given Stripes unprecedented funding rounds, there will be plenty of capital to throw around.
#6. Will FAAMG Become Plural?
Some believe that Stripe has the potential to become the next trillion-dollar company.
That would represent an 8-15x increase from its current valuation and put it amongst the illustrious FAAMG stocks.
Stripe thrives when FAAMG thrives, but it doesn’t face direct competition from any of these names.
This dynamic allows Stripe to benefit from Big Tech’s positives (revenue) without the negatives (getting eaten).
Stripe Stock Moat
Stripe’s moat is similar to other effective software companies that provide services for businesses: a superior offering that embeds itself into the fabric of a company and then spreads its wings.
This strategy is akin to Salesforce’s moat. Provide a core offering that adds so much value and convenience that the idea of parting ways with it is nauseating.
Stripe can then cross- and upsell additional products and features to further lodge itself into the infrastructure and operations of its customers.
This sparks a reinforcing cycle that creates a win-win for Stripe and the client:
- Stripe product helps Company X increase revenue
- Company X reinvests the increased revenue in additional Stripe services to accommodate growth
- Stripe collects larger and more frequent swipe fees from a more successful Company X, in addition to fees from added services like Stripe Treasury or fraud management
It also helps that Company X can be Amazon, Shopify, Salesforce, Uber, or Zoom — quality, high-growth companies.
Stripe Stock Valuation
Stripe raised $600 million in its Series H funding round, valuing the company at $95 billion. This is nearly triple its $36 billion valuation from April 2020.
It is also rumored that secondary market transactions priced Stripe in the $125 – $150 billion price range.
According to an unnamed board member, the capital raised will be “a rainy day fund.” This round increased the Irish brothers’ fortune to $11.4 billion each.
In addition to announcing the latest round, Stripe revealed that it plans to “invest a ton more in Europe this year”.
Stripe Stock Competition
The fintech space is red hot due to smartphone-enabled payments and banking. As new technology expands this ecosystem, expect Stripe to face some competition.
Here are Stripe’s top 9 competitors:
- Square (SQ)
- PayPal (PYPL)
- PayPal owned Braintree
- Adyen (ADYN)
- Payline Data
- Amazon (AMZN)
However, expect this list to expand as Stripe inevitably enters new markets.
Stripe Stock: The Bear Case
#1. Private Market Growth
Stripe’s public offering is one of the most anticipated IPOs in history. Some investors are concerned that this level of demand will make the company overvalued by traditional metrics.
There were a handful of IPOs in 2021 where much of the gains were being had in the private markets. Companies like Airbnb chose to stay private longer and go public at much higher valuations.
Stripe has subscribed to this model, too. Some believe the company could go public at a $150+ billion valuation.
Like most high-growth technology stocks, you’ll be paying a premium to own Stripe stock.
Stripe Stock Allocation in Your Portfolio
Stripe stock might not be for you — each stock comes with its own set of unique risks, just like each investor comes with their own goals and risk profiles.
Regardless of your investment philosophy, the following questions might help you determine how Stripe stock will perform in the long term:
- Is Stripe positioned well to benefit from the rise of digitization?
- Can Stripe fend off competition from smaller fintech companies?
- Will new forms of payments disrupt Stripe’s business model?
- Will demand for shares make Stripe overvalued?
- Is it worth “overpaying” for Stripe in 2021 from a regret minimization perspective?
- Is Stripe vulnerable to future crypto technologies?
- Has Stripe grown too much in the private markets?
Frequently Asked Questions About Stripe Stock
Is Stripe a publicly-traded company?
No, Stripe is not a publicly-traded company. It was founded in 2009 and has been a private company ever since. Stripe will likely remain a private company for some time.
Can I buy shares in Stripe?
Stripe is a private company, and therefore shares in Stripe are not available to the retail investor. You can buy shares in Stripe following its initial public offering, which has not yet been announced.
Will Stripe have an IPO?
In 2020, Stripe’s founder John Collison told reporters that the company has “no plans” to go public right away. However, several private fintechs have gone or are gearing up to go public in 2021, such as Robinhood, SoFi, Chime, and Plaid.
What is Stripe stock?
Stripe stock would represent partial ownership in the financial services company following its public offering. Many investors believe Stripe stock will be a good investment because of the company’s positioning in the digital economy — it is the backbone of the internet.
Bottom Line: Stripe Stock Forecast
It’s unclear when Stripe will IPO, but one thing’s for certain: Stripe stock will be on everyone’s watchlist.
And you’ll have to pay up if you want a piece.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we researched Stripe stock.