What happened

Shares of PayPal Holdings (PYPL -1.84%) were down 8.5% last week, ending an incredibly terrible first half of 2022. In fact, it's officially the worst first half of a year since 1970. The S&P 500 and Nasdaq Composite indices are down a respective 20% and 29%. By comparison, PayPal stock is down 62% so far in 2022 as of the end of trading on July 1. Ouch!  

So what

There was no specific news affecting PayPal in the last week. The entire month of June was terrible, though, as stocks reacted to the U.S. Federal Reserve hiking its short-term interest rate by 0.75%. Risk assets like stocks tend to lose value as interest rates increase.  

PayPal has been stuck in a steep downward spiral all year, though, as its growth rate has slowed dramatically. As the economy has reopened, e-commerce spending has gone from boom time to something far more pedestrian. The fintech is still expanding is it steadily grows its user base and makes its apps like Venmo a more commonly used payment method, but clearly the company missed indications its soaring financials were due for a cooldown. Shareholders have been displeased.

Now what

For better or worse, the Fed is expected to hike interest rates again at its next meetings in July and September as it continues its fight against inflation. Getting commodity prices back in check is obviously a top priority for long-term economic health, but in the meantime stocks like PayPal are taking it on the chin.

At this point, though, PayPal is as cheap as it's been since getting spun off from eBay (EBAY -1.12%) in 2015. Shares trade at just 17 times trailing-12-month free cash flow and 18 times current-year expected earnings. Investors now need to weigh if they believe PayPal can overcome this speed bump in the digital economy and maintain its expansion. Competition is hot in digital payments, but PayPal also has some of the most recognizable apps out there. If the company does indeed manage a bounceback later this year or next, this could be a fantastic buy among fintech stocks right now.