Is Stripe cheap at $95 billion?

In March of 2021, online payment processing giant Stripe announced that it had raised $600 million. The numbers were made public months after the deal was leaked.

It's notable that Stripe was raised in early 2021. Private companies that raised large sums of capital last year have been struggling to hold onto their valuation in the ensuing quarters. This raises an interesting question about the company, did it raise at a price that it can't defend, like many other companies did last year?

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I was not sure until recently, even if I thought about the question from time to time. The update letter from Stripe this month is mostly data-free and contains enough information for us to get dangerous. With some creative math and extrapolation, we can derive valuation calculations for Stripe that should help us better understand how well the payments powerhouse priced its last equity round.

All our math today will become dated the moment that Stripe drops an S-1 filing, but given the dearth of recent rumors to that end, either the company is running a quiet process or really isn’t that close.

A few weeks back, Fidelity cut its internal valuation of its Stripe stock by 9%. Was that too fast?

Let's have fun with numbers this morning. We will start with the company's newly released processing volume. It was into the breach!

Is Stripe overvalued?

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Collectively, businesses on Stripe processed more than $640 billion in payments in 2021, up 60% from the prior year. (Since a lot of this came from one-time behavioral adjustments caused by the pandemic, 2022 won’t match the same level of growth.)