As investor sentiment turns away from stocks in bear markets, the selling might become more indiscriminate. As this process plays out, the underlying condition of the business supporting the stock can get forgotten in this process.

This phenomenon may explain some of the selling in fintech stock PayPal Holdings (PYPL -1.05%) during this latest market swoon. What investors may not realize is that an economic downturn is unlikely to take out PayPal. That suggests the lower stock price could ultimately profit long-term investors.

Let's take a closer look at three key reasons why PayPal stock offers real potential in a bear market.

1. A recession-resistant revenue stream

PayPal derives most of its revenue from transactions on both its PayPal and Venmo platforms. This serves it well as it claims 429 million active accounts across a global footprint. It has also made PayPal an established, widely recognized avenue for processing electronic transactions.

Moreover, PayPal's revenue relies heavily on taking a percentage of transactions. This protects its revenue stream from inflation since rising prices bring increased revenue.

As for a recession, stockholders should remember that consumers still spend during downturns. For example, in the first quarter of 2022, the GDP contracted by 1.5%, according to the Bureau of Economic Analysis. Nonetheless, in that same quarter, PayPal's total payment volume increased by 13%. Additionally, its U.S. revenue, almost 57% of the company's total in Q1, increased by 20%. Hence, its U.S. growth remains strong amid the contraction.

2. The PayPal ecosystem

Furthermore, PayPal is so much more than transaction volumes generated by the PayPal and Venmo ecosystems. The company increasingly looks like an Alphabet of the fintech industry with its diverse lines of business. Its nearly 50 products and services serve consumers, merchants, or both. These include credit and debit cards, digital wallets, couponing app Honey and point-of-sale and card-reading platform Zettle.

Also, in the cryptocurrency space, investors can trade four different cryptocurrencies. This differs from Block, which has focused exclusively on Bitcoin.

Additionally, a segment investors may want to watch more closely is PayPal Ventures. The segment has invested in numerous fintech-related businesses. These are private venture capital investments right now. But as many of these companies grow and claim a more prominent role in the fintech industry, such positions could potentially make PayPal a Berkshire Hathaway of financial technology.

3. The opportunity in PayPal stock

But for now, PayPal is the stock in focus, and conditions have changed, likely making PayPal stock a better investment. At around $77 per share, it has fallen by approximately 75% from its 52-week high. 

PayPal probably became overvalued when it reached $310 per share in July 2021. But at the current stock price, its P/E ratio is now at about 25, down from over 100 in early 2021. This valuation is near a record low for the stock. Moreover, the company forecasts revenue growth of between 11% and 13% for 2022.

Indeed, adjusted net income dropped in the latest quarter by 29% to $1 billion amid higher operating expenses and the loss of an income tax benefit. However, in 2023, analysts not only forecast a 16% increase in revenue but also a return to rising profits, indicating that the challenges that hurt the stock will probably not persist.

Consider PayPal stock

Regardless of how PayPal stock behaves, its book of business should not see significant adverse effects from economic challenges. The revenue stream based heavily on percentage transaction costs will adjust to inflation, and revenue continues to grow amid the slowdown.

Moreover, its diverse ecosystem shows hints of the attributes that boosted both Alphabet and Berkshire Hathaway over time. With the discounted stock price and multiple, it looks increasingly like a fintech stock to buy right now.