Over the past 12 months, PayPal's (PYPL +0.17%) stock declined 33% as the S&P 500 advanced 16%. The digital payment leader's slowing revenue growth, macroeconomic and competitive challenges, and unclear plans for the future all weighed down its stock.
Will PayPal's stock bounce back over the next 12 months? Let's review its recent growth rates, near-term challenges, and valuations to see if it's worth buying as a turnaround play.
Image source: PayPal.
What happened to PayPal over the past year?
In 2018, PayPal's former parent company eBay (EBAY +1.20%) said it would replace PayPal with Adyen (ADYE.Y 0.94%) as its preferred payment provider over the following five years. That announcement rattled PayPal's investors, but its robust growth during the pandemic -- which drove more people to make digital payments -- temporarily offset its loss of eBay's merchants.
In 2021, PayPal announced it aimed to reach 750 million active accounts by 2025. However, from 2021 to 2024, its number of year-end active accounts increased only from 426 million to 434 million. That figure only rose to 438 million by the end of the third quarter of 2025.
PayPal grew at a slower-than-expected rate, facing stiff competition from other digital payment platforms and inflationary pressures that affected consumer spending. Its gradual decoupling from eBay, which concluded in 2023, exacerbated that pressure.
NASDAQ: PYPL
Key Data Points
Over the past year, PayPal gained new active accounts, and its total payment volume (TPV) increased. However, its number of payment transactions fell for four consecutive quarters as its transaction take rate (the percentage of each transaction it retains as revenue) dipped.
|
Metric |
Q3 2024 |
Q4 2024 |
Q1 2025 |
Q2 2025 |
Q3 2025 |
|---|---|---|---|---|---|
|
Active Accounts Growth (YOY) |
1% |
2% |
2% |
2% |
1% |
|
TPV Growth (YOY) |
9% |
7% |
3% |
6% |
8% |
|
Payment Transactions Growth (YOY) |
6% |
(3%) |
(7%) |
(5%) |
(5%) |
|
Transaction Take Rate |
1.67% |
1.73% |
1.68% |
1.68% |
1.64% |
|
Revenue Growth (YOY) |
6% |
4% |
1% |
5% |
7% |
Data source: PayPal. YOY = Year-over-year.
PayPal's total number of transactions declined for two reasons. First, its branded checkout platform, Venmo peer-to-peer payments app, debit cards, and buy now, pay later (BNPL) platform all net higher average payments than its other services. Those four businesses fueled most of PayPal's growth and boosted its total revenues over the past year.
Second, PayPal is downsizing its unbranded payment processing platform (Braintree), which generates a lot of its smaller and lower-margin transactions. That strategy reduces its total transactions but stabilizes its take rates by focusing on higher-value transactions. That's why its take rates held steady throughout most of the past year before slipping in its latest quarter.
What will happen to PayPal over the next year?
PayPal's high-growth days are behind it, but its revenue is expected to rise gradually as it focuses on generating higher-value, higher-margin transactions to boost its take rates.
To accomplish this, it's forging deeper partnerships with credit card companies, rolling out more services for brick-and-mortar stores, introducing new cryptocurrency trading tools, expanding its high-yield savings accounts, and even launching its own stablecoin -- PayPal USD (PYUSD +0.00%) -- to support cross-border transfers.
It's also bundling its payment, financial services, and risk management tools into the unified PayPal Open platform, improving its cross-compatibility with overseas payment platforms through PayPal World, and integrating Venmo into more physical and online stores. All of those new features, which the company is tying together with new AI features, could widen its competitive moat.
As PayPal's top-line growth slows, the company has been cutting costs and repurchasing more shares. From 2020 to 2024, its operating margin expanded from 15.3% to 16.7%, as its adjusted earnings per share (EPS) rose at a CAGR of 6% from $3.88 to $4.65. From 2024 to 2027, analysts expect PayPal's adjusted EPS to grow at a CAGR of 11% to $6.29. That's a solid growth trajectory for a stock that trades at just ten times forward earnings.
If PayPal matches Wall Street's estimates and still trades at ten times forward earnings by the beginning of 2027, its stock could rise about 8%. However, if it trades at a more generous 15 times earnings, its stock would rally more than 60%.
Therefore, PayPal's low valuation should limit its downside this year. If it continues to gain new accounts, grow its TPV, and stabilize its take rate, it could attract more attention from value-seeking investors as other higher-growth fintech stocks trade at frothier valuations.
