Over the past few years, PayPal (PYPL 0.05%) has faced slowing revenue and user growth, increased competition, and an uncertain macroeconomic environment, all of which have contributed to its stock lagging that broader market. The fintech specialist isn't out of the woods yet, but in my view, it can bounce back. As a shareholder, there is one key reason I intend to stick with PayPal for the long term.
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The importance of brand trust
Having a brand that consumers recognize and trust is incredibly important. It can give businesses strong pricing power, the ability to attract and retain customers while spending less on advertising, and many more perks. PayPal, a pioneer in online payment processing, has successfully built a solid brand name that people trust, and a large ecosystem of consumers and business clients. Those are significant competitive advantages.
In the third quarter, the company processed a total payment volume of $458 billion, an 8% year-over-year increase. It ended the period with 438 million active accounts, up by 1% year over year.
NASDAQ: PYPL
Key Data Points
PayPal's popularity with retailers also speaks volumes, as it boasts strong adoption among some of the best-known online platforms. It's brand moat and extensive ecosystem provide it with significant growth and monetization opportunities. Consider the company's relatively new advertising business. It has access to substantial data on consumer habits, preferences, purchases, and more. That data is a gold mine for companies looking to launch targeted ads. This business could eventually become a significant contributor to PayPal's financial results.
And that's just one opportunity. From increased adoption with even more retailers, growth in active accounts, and expanding total payment volume, it could see revenue and earnings grow at a good clip over the long run. That's one core reason why I don't ever intend to sell my shares.
Patience may be rewarded
True, PayPal has not performed well in recent years. Many shareholders have been disappointed, and it's hard to stay patient. But one of the keys to earning superior returns over the long run is to stick with excellent companies even when they are experiencing difficulties.
That's PayPal right now. Its stock performance has been poor, but its economic moat remains intact. And as the fintech leader devises a plan to turn things around, which includes prioritizing high-margin opportunities, growing free cash flow, and scaling its advertising business, its long-term prospects are still bright.
