Financial-tech upstart Stripe is now valued at roughly $95 billion after a recent round of funding, WSJ reports.
The Details: Stripe grabbed $600 million from a group that included “Ireland’s National Treasury Management Agency, insurers Allianz SE and AXA SA and investment managers Baillie Gifford & Co. and Fidelity Investments.” The company was last valued at around $35 billion after a $250 million funding round in 2019.
Why It Matters: Stripe is climbing the rankings of most valuable startups out there. With this addition, it passed another “startup darling” — Instacart. But it’s still not No. 1 in value. That title belongs to controversial Chinese fintech giant Ant Group.
- Investors like payment processors as a way to “get exposure to a range of fast-growing industries.” But it also raises a question of how long can this Covid-driven run-up of tech stocks last.
How It Happened: Stripe, a payment processor that serves startups and quickly expanding internet companies, was a winner of the pandemic. As e-commerce boomed and more transactions shifted online, Stripe customers like DoorDash, Shopify and Wayfair all “experienced a surge in demand as consumers shifted their spending away from bricks-and-mortar establishments.”
- Though Stripe (and other payment processors) took criticism from smaller businesses on how the rising company insulated itself from potential pandemic losses.
The Outlook: “Stripe doesn’t disclose its payment volumes or financial results. The company said in a release that it processes payments worth hundreds of billions of dollars a year for millions of businesses worldwide and that it counts as customers more than 50 companies that each use Stripe to process more than $1 billion annually.”
- Stripe plans to bulk up its European business with the money and is also continuing to add more financial services products to its customers (offering checking accounts and other business-banking services.)
Let’s say Stripe processes $300 billion per year right now with a 2% average transaction fee. That would imply annual Revenues of $6 billion and potentially Gross Profits of over $4 billion.
A $95 billion valuation would value this hypothetical Stripe at 24x forward Gross Profit. In that scenario, Stripe could be pretty attractively valued depending on its growth rate.
Regardless, we will be waiting with bated breath for a potential Stripe IPO in the future (if ever).