Mohit Oberoi
4 min read
In This Article:
PayPal stock (PYPL) has had a bumpy ride since 2020. The stock more than doubled in 2020 and continued its good run in the first half of 2021. However, PYPL ended that year in the red, meeting the same fate for the next two years. 2024 was a welcome break for PayPal investors as the “law of averages” finally caught up with the stock, and it gained a respectable 39%, outperforming the S&P 500 Index ($SPX) after three consecutive years of underperformance.
Cut to 2025, and PYPL stock has already lost nearly 20% and is yet again massively underperforming the broader market, which has recovered from its April lows. I see the recent fall in PayPal stock as a good buying opportunity, as we’ll explore in this article.
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PayPal started the year on a strong note but fell sharply after its Q4 2024 earnings. While the company posted better-than-expected revenues and profits for the quarter, and its guidance came in ahead of estimates, slowing growth at Braintree, its subsidiary focused on card processing, dampened sentiment.
The tariff chaos did not help, as fintech companies, including Affirm (AFRM) and PayPal, slumped in April amid concerns that tariffs could lead to a recession, hurting their business. Both these stocks have not yet recovered to their 2025 highs, even as tariff worries have greatly (if not fully) subsided.
While these are short-term headwinds, PayPal is facing some structural challenges in the form of higher competition across nearly all its business verticals. For instance, its branded checkout is facing intense competition from Apple Pay (AAPL) and Google Pay (GOOG), while the non-branded business faces competition from companies like Stripe. The P2P business is also facing competition from Zelle and Cash App (XYZ).
The competition has negatively impacted PayPal’s topline, which is now growing in single digits. With rising competition, digital payment companies have been feeling pressure on their take rate (the fees they charge for processing the transaction), and PayPal’s operating margins have fallen.
While I find corporate turnarounds a cliché, PayPal is a legit turnaround story under the new CEO, Alex Chriss, who is working on profitable growth. The strategy has shown results, and the company has had five consecutive quarters of profitable growth. PayPal has also made a foray into digital advertising, capitalizing on the vast consumer data that it possesses. The company is also using artificial intelligence to personalize experiences for customers.
