PayPal (PYPL -1.85%) has gone public twice. The digital-payments company initially went public in 2002, but eBay (EBAY -0.26%) acquired it that same year. It remained a subsidiary of eBay and was its primary payments platform until 2015, when it was spun off again as a public company.

Investors received one new share of PayPal for each share of eBay they owned, but it didn't go through another IPO. Investors who didn't already own eBay's shares could only buy PayPal's stock when it opened at $41.63 on July 20, 2015.

PayPal's campus in Dublin, Ireland.

Image source: PayPal.

If you had invested $1,000 on that first trade, your investment would have blossomed to $7,460 when PayPal closed at its all-time high of $308.53 on July 23, 2021. But today, it trades at $73 -- so your stake would be worth only $1,765.

A 77% return in less than eight years isn't too shabby, but it still underperformed the S&P 500's 84% gain. Let's see why PayPal's stock soared, why it plunged, and if it's still a worthwhile investment.

What happened to PayPal after its spin-off?

Between 2015 and 2022, PayPal's annual revenue rose from $9.2 billion to $27.5 billion, which represented a compound annual growth rate (CAGR) of 17%. Its annual net income grew at a CAGR of 10%, from $1.2 billion to $2.4 billion.

Its number of active customer accounts also grew from 179 million to 435 million, while its total payment volume (TPV) jumped from $282 billion to $1.36 trillion. Those growth rates are impressive, but they've cooled off significantly over the past three years:

Metric

2018

2019

2020

2021

2022

Revenue growth

18%

15%

21%

18%

8%

Active accounts growth

17%

14%

24%

13%

2%

TPV growth

27%

23%

31%

33%

9%

Adjusted EPS growth

28%

28%

31%

19%

(10%)

Data source: PayPal.

PayPal's growth accelerated in 2020 as the pandemic drove more businesses and consumers to adopt digital payments. However, that acceleration also temporarily masked its loss of eBay, which ended its long-standing partnership with PayPal in 2018 to initiate a three-year transition toward its smaller Dutch competitor , Adyen (ADYE.Y 0.41%).

The loss of eBay's business became more apparent after PayPal lapped its pandemic-induced growth spurt, and that slowdown was exacerbated by inflation and other macroeconomic headwinds throughout 2022. Stiff competition from other platforms -- including Adyen, Block's Square and Cash App, and Apple Pay -- also probably throttled its growth in active accounts.

Analysts expect that slowdown to continue, with 7% revenue growth this year, but they also expect its adjusted EPS to increase 18% as it reins in its spending and buys back more shares.

Why did PayPal's stock plunge nearly 80% from its all-time high?

PayPal's accelerating growth during the pandemic attracted the attention of many investors during the buying frenzy in growth and meme stocks in 2021. PayPal then poured gasoline on that fire during its investor day presentation in February 2021.

It claimed that between 2020 and 2025, it could nearly double its active accounts from 377 million in 2020 to 750 million, more than double its annual revenues to $50 billion, and double its annual free cash flow (FCF) from $5 billion to $10 billion. Those forecasts attracted a stampede of bulls, and PayPal's stock skyrocketed to $308.53 just five months later. At that price, PayPal was valued at a whopping 67 times the adjusted EPS it would generate in 2021.

But as PayPal's growth slowed down, it became clear that it couldn't achieve those lofty goals. That's why it abandoned its goal of reaching 750 million active accounts last February. This February, CEO Dan Schulman, who had led PayPal ever since its split from eBay, also announced that he would step down and retire by the end of the year.

Without a clear successor, PayPal faces a murky future as it tries to weather the macroeconomic and competitive headwinds. All those uncertainties caused PayPal to quickly lose its premium valuation as investors pivoted from growth to value stocks. At $73, PayPal now trades at just 15 times its adjusted EPS forecast for 2023.

Is PayPal's stock worth buying right now?

PayPal's low valuation might prevent its stock from dropping further this year, but its upside potential should remain limited until the macro environment improves and it rolls out fresh features to attract new users. For now, investors should stick with more resilient tech companies that can hold up better than PayPal through economic downturns.