PayPal (PYPL 2.9%) is a leader in digital payments, which is why many investors seek to invest in PayPal stock. The company's technology enables people to make digital payments to other PayPal users and merchants that accept PayPal.
The financial technology (fintech) company operates its namesake payments platform and several branded and non-branded platforms. Notable brands include its peer-to-peer payments app Venmo and shopping experience platform Honey. PayPal also offers a buy now, pay later solution to finance transactions.
PayPal is one of the world's largest and most ubiquitous digital payment platforms. The company processed a staggering $1.5 trillion in total payment volume in 2023. It has more than 430 million users, and 79% of the largest retailers in North America and Europe offer the option to pay via PayPal.
Here's a step-by-step guide on buying PayPal shares and some factors to consider before investing in the fintech stock.
How to buy
How to invest in PayPal
You can buy shares of PayPal through any brokerage account. If you still need to open one, these are some of the best-rated brokers and trading platforms. Here's a step-by-step guide to buying PayPal stock using the five-star-rated platform Fidelity.
Fidelity makes it easy to buy stocks. Its website also offers a video tutorial and step-by-step guide. Here's a screenshot of how to place a stock trade using Fidelity:
On this page, fill out all the relevant information, including:
- The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
- The ticker symbol (PYPL for PayPal).
- Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the current market price.
Once you complete the order page, click the Place Order button at the bottom and become a PayPal shareholder.
ETF options
Alternative ways to invest in PayPal stock
Instead of actively buying shares of PayPal directly, you can also passively invest in the financial technology company through a fund holding its shares. Exchange-traded funds (ETFs) are an easy way to gain exposure to PayPal stock.
According to ETF.com, 288 ETFs held 109.6 million shares of PayPal as of late 2023. The biggest holder was the Invesco QQQ Trust (QQQ 1.54%), with 19.2 million shares. However, PayPal had a relatively small portfolio weighting at 0.5% of the ETF's holdings.
Exchange-Traded Fund (ETF)
Several ETFs had larger portfolio weightings of PayPal stock. The ETFMG Prime Mobile Payments ETF (IPAY 1.26%) had the largest allocation to PayPal stock in late 2023 at 5.5%. It was the fund's fifth-largest holding.
Should I invest?
Should I invest in PayPal?
Before buying shares of PayPal, you need to determine whether it's the right stock for you. Here are some factors to consider before buying shares of PayPal.
Profitability
Is PayPal profitable?
Profit growth is a big factor in powering stock price appreciation over the longer term. It's an ideal area for beginning investors to focus on before buying shares of any company.
PayPal produced $3.8 billion of operating income in 2022. While that was down 10% from the previous year, PayPal's earnings have steadily risen over the years:
As that chart shows, PayPal's rising operating income has driven its share price higher since its split from eBay. However, its 2022 decline has weighed heavily on shares.
Earnings were under pressure due to heavy investments in its platform to improve the customer experience. The company believes its investments will drive growth over the long term. It also sees cost savings initiatives implemented in 2022 driving strong earnings growth in 2023. It was on track to increase its non-GAAP (generally accepted accounting principles) earnings per share by 21% in 2023.
PayPal revenue
Revenue growth also helps drive stock price appreciation, especially for companies earlier in their growth cycle. PayPal generated $27.5 billion of net revenue in 2022, an 8% increase from the prior year. Rising active accounts and total payment volumes are helping drive revenue growth.
Revenue
The company expects to continue growing revenue at an above-average rate. PayPal's revenues rose 8% in the third quarter of 2023, and the company expected 6% to 7% revenue growth in the fourth quarter.
PayPal valuation
PayPal's stock price has fallen sharply in recent years. As a result, its valuation has become more attractive:
With a forward price-to-earnings (P/E) ratio of less than 17 times in late 2023, PayPal traded at a relatively low valuation. The S&P 500 traded at about 20 times its forward P/E, and the Nasdaq Composite Index was even higher at almost 28 times its forward P/E. PayPal's lower forward P/E multiple means it's cheaper than the broad market indexes.
Dividends
Does PayPal pay a dividend?
PayPal does not pay a dividend. However, it does return cash to investors by repurchasing shares. The company used over 80% of its free cash flow to repurchase $4.2 billion in shares in 2022. In 2023, PayPal expected to repurchase about $5 billion of its shares.
Cash Flow
Stock splits
Has PayPal stock split?
As of late 2023, PayPal has never completed a stock split. The payments giant seemed unlikely to split its stock anytime soon. Although shares had surged more than 600% at one point following its separation from eBay, the stock had returned most of that ground by late 2023 (only rising about 60% to about $60 per share). The stock would need to surge again before PayPal would likely consider a stock split.
Publicly traded?
Is PayPal publicly traded?
PayPal is a publicly traded company. It trades on the Nasdaq Stock Exchange under the ticker symbol PYPL. PayPal has a unique history as a public company.
When did PayPal IPO?
PayPal completed its initial public offering (IPO) in 2002. However, eBay (EBAY 1.32%) acquired the company a few months later for $1.5 billion in stock. PayPal investors received 0.39 shares of eBay for each PayPal share they held.
In 2015, eBay and PayPal separated. Existing eBay investors received one share of PayPal stock for each share of eBay they held. Since the split from eBay, PayPal has traded as an independent public company.
Related investing topics
The bottom line on buying PayPal stock
PayPal is a leading digital payment platform that's highly profitable and growing fast. Although PayPal's profits dipped in 2022, the company expects earnings to resume their upward trajectory in 2023.
The 2022 speed bump caused shares to plunge, which has the stock trading at a very reasonable valuation. PayPal's improving profitability, value-enhancing share repurchases, and attractive valuation mean it could be an incredibly enriching stock to buy for the long term.
FAQs
FAQs on investing in PayPal stock
Is it good to invest in PayPal stock?
PayPal has been an inconsistent long-term investment since its split from eBay in 2015. At one point, shares were up more than 600%. However, as of late 2023, they had gained about 60%, underperforming the S&P 500's 160% total return. During that period, PayPal produced an average annual return of 5.8% vs. 12% for the S&P 500.
However, that doesn't mean PayPal can't be a good stock to own for the long term. It generates lots of free cash flow it uses to expand and repurchase its attractively priced shares. Meanwhile, PayPal's cost-cutting efforts should improve its profitability, potentially boosting its stock price.
Can you invest with a PayPal account?
You can't directly buy stocks via a PayPal account. However, many brokers will allow you to transfer your PayPal balance into an account and use it to buy stocks. You'll need to open a brokerage account with a platform that supports PayPal and link your accounts to buy stocks with your PayPal account.
Will PayPal pay dividends?
PayPal didn't pay dividends as of late 2023. However, the company could eventually initiate a dividend. It generates significant free cash flow, the bulk of which it's already returning to shareholders through share repurchases. It could eventually start allocating some of that cash toward dividend payments.
Where can I buy PayPal stock?
You can buy PayPal stock through a brokerage account. Shares trade on the Nasdaq exchange.
