After navigating a challenging period, PayPal (PYPL +1.28%) is positioning itself for a comeback under the leadership of CEO Alex Chriss, who took over the top job in 2023 with a renewed focus on innovation and serving small businesses.
2024 marked a turning point for fintech, which went through a "transition year." PayPal's stock price rose 35% as investors grew more optimistic about the company's moves to reaccelerate growth. However, since peaking in 2021 at $310 per share, the stock remains down 73%.
In 2025, PayPal will look to build on its recent momentum, and the potential for growth appears strong. Today, the stock is priced at an attractive valuation, raising an important question: Is now the right time to add PayPal to your portfolio?
NASDAQ: PYPL
Key Data Points
PayPal stock has struggled in recent years
PayPal has established itself as a top company in the payment space and is one of the most popular digital payment apps across all generations, according to The Motley Fool Ascent survey of 2,000 Americans. In its most recent quarter, the company handled $422 billion in transaction volume across its 432 million active accounts.
While PayPal is well-positioned in the payment space, it has faced scrutiny for its lack of clear growth initiatives and falling take rate on transactions. The take rate is the revenue PayPal keeps from every transaction, and it's a key metric the company uses to track profitability. This metric has fallen every year since 2015, and investors have grown concerned about PayPal's shrinking margins and lack of attractive growth opportunities.
How PayPal plans to transform and reaccelerate growth
In late 2023, Alex Chriss took over as PayPal's Chief Executive Officer. Chriss took over the top role after leading Intuit's small-business and self-employed group, where he served as Executive Vice President and General Manager. Chriss looks to take that experience with Intuit and apply it to PayPal, and the company has undertaken initiatives to reaccelerate growth and build on its strong foundation.
PayPal has continued to see solid growth of Braintree, its unbranded checkout option. This has been one of the fastest-growing areas of fintech's business, but it also produces smaller margins.
However, PayPal's branded checkout option provides higher margins, and the company has been looking to revamp this product to reignite growth. Under Chriss, PayPal is developing its branded checkout to cater to small and medium-sized businesses (SMBs) through its PayPal Complete Payments Platform.
Image source: Getty Images.
The fintech's revamped platform has attracted some big names
Chriss aims to make this platform stand out by improving the check-out experience and enabling one-click checkouts called "Fastlane." Fastlane promises to improve the guest experience by reducing checkout time and helping merchants convert more sales. According to PayPal, Fastlane reduces checkout time by 32% and has attracted big-name customers, including Salesforce, Adobe, and BigCommerce.
The company has also become an additional payment processor for Shopify Payments in the U.S. Its branded checkout option is integrated into Shopify, creating a streamlined process for SMB owners to manage orders, payouts, reporting, and chargeback flows.
PayPal has also partnered with Amazon to bring its checkout option to SMBs that offer Buy with Prime. The company will expand on this in 2025, giving Prime members a chance to link their Amazon and PayPal accounts. According to Chriss, this is an area where "there is a significant opportunity. "
Is PayPal a buy?
So far, I like what I've seen from PayPal, and investors seem to agree, with the stock rising 35% over the past year. Chriss has done a good job of breathing life into PayPal's business, and volume through PayPal Complete Payments is up 40% through the first half of this year.
The company will also look to capitalize on its slew of consumer spending data. It'll look to use artificial intelligence (AI) to create targeted discounts and personalized shopping recommendations as it dips its toe into the digital marketing space, which is projected to grow nearly 15% annually by 2030.
PYPL PE Ratio data by YCharts.
PayPal is priced at a reasonable valuation, with the stock trading around 19.6 times earnings and 15 times next year's earnings. At that price, PayPal looks like an excellent stock to buy today and hold for several years as it expands on key partnerships, continues to roll out offerings for SMBs, and learns how to better monetize its data.
