PayPal stock is making a comeback. The last time it was trading like this, the year was 2021, and PayPal was very much the leading fintech stock. Since then, it has declined more than 80%, taking a year of sideways action near the lows, and greatly testing investors’ patience. We’ve seen changes in legislation, management, and ways of working, but it seems to have been for the better.
But now, in 2024, PayPal is back to trading at a significant relative discount, compared to its historical average, with 18.2x forward earnings and a valuation that clearly sets it apart from its closest competitors.
So, how did this happen, and will PayPal’s comeback continue? We’re going to look into all the reasons why PayPal might be sitting in such a good position right now.
Trading Sideways
As mentioned previously, after PayPal bottomed in 2023, it began to build a solid base as it traded sideways, eventually stabilising near the $64 level by August. This has subsequently allowed PayPal’s stock to establish a stable support level, reassuring investors of its resilience, while also giving the stock a chance to consolidate and test the price boundaries showing where strong buying interest lies.
As the stock held steady, it signalled reduced volatility, which then attracted cautious investors who were waiting for clear, sustainable patterns before re-entering the market. In effect, PayPal has reacted to its massive lows in the best way possible.
While some stocks can easily crash and burn, PayPal managed to use this period of low volatility to rebuild confidence and test its die-hard investors, eventually leading to the renewed optimism we’re seeing now.
Cost Management
Another factor contributing to PayPal’s comeback is its commitment to improving operational efficiency and cost management.
After facing such a massive decline, PayPal undertook a series of cost-cutting measures, including the implementation of AI, the resulting streamlining of its workforce, and the restructuring of expenses. This then helped the company to increase its profit margins, even as it invested in growth areas like diverse digital payments and cryptocurrency offerings.
This focus on sustainable cash flow has been particularly reassuring for investors concerned about profitability, as PayPal, with its more streamlined operation and lower cost base, has now become less vulnerable to market fluctuations, which has given the company more flexibility to reinvest in core products and expand into new offerings.
High-Growth Markets
PayPal has also strategically expanded into high-growth markets, such as ‘Buy Now, Pay Later’ services.
This move has effectively tapped into the rising demand for flexible payment options, especially among younger users who prefer manageable, interest-free instalments over traditional credit. For those unaware, PayPal’s BNPL service allows consumers to split payments across several months, ultimately boosting consumer purchasing power while encouraging larger transaction sizes for merchants.
By strategically aligning with trends like BNPL, the company has positioned itself at the forefront of consumer finance innovation, which has reinforced its relevance and adaptability in a highly competitive market.
Loyalty Initiatives
Lastly, PayPal has been working to improve customer experience by integrating more seamless payment solutions across popular platforms. One major example here is the integration of Venmo – PayPal’s popular peer-to-peer payment app – with Amazon, a move that broadens Venmo’s use cases and increases its visibility.
In 2024, millions of Amazon users can choose Venmo as a payment option, which subsequently introduces them to PayPal – if they haven’t been introduced already. From here, PayPal has been enhancing its loyalty programs to keep those customers on board. Its ‘PayPal Rewards’ program, for instance, allows users to earn points on eligible purchases, redeemable at top retailers or for cashback.
This integrates with PayPal’s Honey platform, automatically surfacing deals and rewards during checkout to create a seamless shopping and savings experience. Things like this can be particularly attractive for waiting investors, as they signal that PayPal is not only enhancing its core product offering but also working to build a deeper connection with customers, which lends to a long-term, growing, and stable ecosystem.
Diversifying Strategies
One of the main – and easily viewable – reasons for PayPal’s recent comeback is its expanded focus on diversified revenue streams and strategic partnerships.
Over the last few years, the company has ventured into a number of areas, including digital ads, cryptocurrency services, and specialised payment solutions, including a push into online casino payments, which is helping them capture more of the payment market.
Not only is PayPal’s ad platform and its partnerships with giants like Amazon increasing engagement in the ads market, but the fact PayPal is available at a casino as an easily accessible payment deposit app has enhanced its appeal in the gaming market – a market of high interest for investors – and proved its appeal as an increasingly versatile fintech player.
PayPal’s Next Move
One of the most encouraging things for investors is PayPal’s outperformance of several prime names in the same sector. Against competition like Block, Visa, and Mastercard, PayPal has been storming ahead, positioning itself as the ‘highlight fintech stock’ in the market, which has contributed to its own bull run.
What’s more, over the last three weeks, PayPal stock has formed a tight bull flag that indicates even higher prices are coming. If the stock can break out and hold above the $82 level, another large bull run is likely to ensue, which could be a great opportunity for investors who hold faith.
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