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Here's Why PayPal Is a Great Stock to Help You Beat Inflation

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The top fintech stock is just getting started.

Investors are worried about spiking inflation and what it could mean for the economy as well as the stock market. In the following segment of Backstage Pass, recorded on Oct. 13, Fool contributors Brian Withers, Trevor Jennewine, and Rachel Warren discuss why PayPal Holdings (PYPL 1.26%) is a great stock to buy in the current investing environment. 

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Brian Withers: We are straight up on five o'clock and regardless of how the market did today, I'm going to seem like a broken record regardless of how the market did today it's been a good decade for stocks with the S&P 500 up 342% in total returns over the last 10 years. Just a reminder more than 300% is a four-bagger. That's doubling your stock, doubling your investment and then doubling it again and then a little 42% extra, just the tip of being a part of the market for the last decade. But wow, that's really awesome.

Today, we just chatted, Trevor and Rachel are going to join me. We're going to go over some key news items of the day and provide a little Foolish perspective. Without further ado, we're going to jump right in. Stocks are strange today. Not often I get to cheer when the market is going down. The tech stocks were seen to be up, but it wasn't up enough to drag the whole market up and the whole market went sideways a little bit or down, but there's a number of things going on.

Earnings data is starting to come out and there was an inflation report that showed a faster-than-expected rise in inflation and JPMorgan's Jamie Dimon talked on their earnings call and further put an exclamation point on that and noted that year-over-year inflationary readings, this was his quote from the earnings call, under 4%. 

Basically, seeing a +4% raise in cost, he says are unlikely over the next six months. He thinks inflation is going to remain high. He talks about the company preparing for probabilities and eventualities. One of those probabilities is that inflation may go higher than people think.

Given all that, what's one stock you think could do well regardless of what happens with inflation? Trevor, why don't you take this one first.

Trevor Jennewine: Sure. I'm going to go with PayPal here. PayPal has a massive user base, 403 million users and 32 million merchants. A massive global user base and it generates revenue primarily by taking a percentage of total payment volume on the platform. That figure over the last 12 months is over $1.1 trillion now. There's a lot of money flowing through PayPal's platform.

If you have rising prices consumers may spend less, but a portion of that could be offset by PayPal taking a greater cut just because the prices are going up and they're taking a percentage of that total payment volume. Then on the other side of that equation, if you have = inflation headed the other direction, prices are going down or were remaining constant, PayPal still has that strong business model.

It's really established itself as a leader in the digital payments industry, especially on those digital online channels. But the company has also made moves into the in-store setting as well. They have the Venmo Credit Card. It's letting people spend Venmo balances in-store. They rolled out QR code payments last year and they've seen a lot of traction with companies signing up for that. You can use your PayPal mobile app or your Venmo mobile app to make in-store purchases with these retailers.

Then they have the iZettle acquisition a little while back, too. If you're not familiar with iZettle they are a European version of Square. They have a point-of-sale software and hardware that lets merchants manage their stores through digital and physical channels. PayPal has positioned itself as an important payment solution online, but increasingly important offline too. I think that gives the company a buffer against inflation.

Rachel Warren: I really like PayPal. I think it's a great company. I think it's a fantastic investment to play off the ongoing fintech revolution and its services are definitely in demand.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Trevor Jennewine owns shares of PayPal Holdings and Square. The Motley Fool owns shares of and recommends PayPal Holdings and Square. The Motley Fool recommends the following options: long January 2022 $75 calls on PayPal Holdings. The Motley Fool has a disclosure policy.

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