MSCI is a high-quality compounder that has near monopoly position in the international index business. It benefits from
several secular tailwinds that will provide mid-teens earnings growth for the next decade. MSCI’s market position in ESG
research has potential upside as large as the passive investing trend we saw over the last 2 decades. While ESG makes
up just 6% of the business today and is overshadowed by a wonderful core index business, it is the fastest growing
segment that saw accelerated growth recently. Further, it should generate operating margins somewhere between that
of a ratings agency and an index provider (50 – 70+% margin). I believe the market undervalues the earnings power of
the MSCI due to ESG segment’s relative size and lower visibility as well as the company’s extremely long-term
reinvestment horizon.
Venmo monetization is underway going from virtually $0 revenue just a few years ago to $450 million annual run rate, 39 bps monetization rate. Compared to PayPal’s overall take rate of 2.5%, it would appear that Venmo is under-monetization. Only ~1/3 of its payment volume generates revenue, driven by instant transfer fees – 100 bps fee. Management expects Pay with Venmo to become a significant driver (~2.6% fee), but adoption has been slow so far. Pay with Venmo (PWV) has had limited consumer awareness. Most of PWV volume happened through user clicking through the PayPal checkout button to reveal the PWV option. Thus, a significant percentage of PWV volume has come from users that already use the PayPal button - cannibalizing PayPal checkout volume. As PWV was launched a few years ago, I believe many overlapped users have already seen the PWV option wherever it is available. The slow uptake implies 1) there is little user overlap or 2) there is significant user overlap, but few opted t...
Comments
Post a Comment