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PayPal (NASDAQ: PYPL) has taken it on the chin over the past several years. The digital payment company has struggled to maintain the rapid growth it saw during the pandemic and has faced scrutiny for its declining margins.
However, the past year has been much better for the fintech. It has undergone a transition year to improve its offerings and margins. Today, PayPal trades at a reasonable valuation as the company looks to restart the growth that made it a fintech darling a few years ago. Here's why it could be a solid buy for investors today.
PayPal has taken investors on a roller coaster
Several years ago, the company enjoyed rapid growth as pandemic-era measures pushed shopping online and made payments more digital. It added customers at a staggering pace, and its total transaction volume exploded to over $1 trillion.
However, the company had a tough go of it starting in late 2021 when its rosy expectations seemed less likely to become a reality. The company shifted from adding customers and focused on getting more from those customers.
It also struggled with declining transaction margins due to a falling take rate (the revenue that it keeps on every transaction it processes). Part of this was due to the rapid growth in Braintree, its unbranded checkout option. While this has been one of the fastest-growing areas of the company, it is also a lower-margin business that was dragging down analysts' growth expectations.
CEO Alex Chriss has breathed life into the fintech
PayPal stock had declined from its peak of $309 to $50 by October 2023, and former CEO Dan Schulman announced he would step down from the role he had held since PayPal split from eBay in 2015. Enter Alex Chriss.
In September 2023, Chriss brought his talents over from Intuit, where he was the executive vice president and general manager for its small-business and self-employed group.
Chriss' first task was to reignite growth by revamping PayPal's checkout options and better serving small and medium-size businesses (SMBs). One of the initiatives was to improve the checkout experience and enable one-click checkouts, a feature called Fastlane. According to the company, Fastlane reduced checkout time by 32% and attracted big-name customers, including Salesforce, Adobe, and BigCommerce, an e-commerce platform that provides software as a service to retailers.
The company has also become an additional payment processor for Shopify Payments in the U.S., streamlining the process for SMB owners to manage orders, payouts, reporting, and charge-back flows. It has partnered with Amazon to bring its checkout option to businesses using Buy with Prime. The company will expand on this offering in 2025, an area where Chriss says "there is a significant opportunity."