In This Article:
PayPal's (NASDAQ: PYPL) stock closed at an all-time high of $308.53 on July 23, 2021. At the time, the pandemic was generating strong tailwinds for its business as more people shopped online and used digital payments. That growth spurt offset the loss of its former parent company, eBay, to its Dutch competitor Adyen as its preferred payments provider in a five-year transition from 2018 to 2023.
But by Oct. 27, 2023, PayPal's stock had sunk to a six-year low of $50.39. The bulls fled as those pandemic tailwinds dissipated, inflation curbed consumer spending, and it faced tougher competition across the fragmented digital payments market.
PayPal's stock now trades at about $83. It bounced back as its growth stabilized, it expanded its ecosystem, and it focused on growing its profits again. So will this divisive fintech stock head even higher over the next 12 months?
What happened over the past few years?
Back in 2021, PayPal predicted it could reach 750 million active accounts by 2025. However, the company eventually withdrew that forecast and ended the third quarter of 2024 with just 432 million active accounts. That represented just 1% growth from a year earlier, but it was finally gaining active accounts again after shedding 2% of its accounts in 2023.
PayPal's total payment volume (TPV) continued to grow at a steady rate even as it struggled to gain new users. It achieved that by rolling out more features for its namesake app, expanding its Venmo peer-to-peer payments app, and tethering more businesses to its Braintree back-end payments platform.
| Metric | 2020 | 2021 | 2022 | 2023 | 9M 2024 |
|---|---|---|---|---|---|
| Active accounts growth | 24% | 13% | 2% | (2%) | 1% |
| TPV growth | 31% | 33% | 9% | 13% | 11% |
| Revenue growth | 21% | 18% | 8% | 8% | 8% |
Data source: PayPal.
As a result, PayPal's revenue growth stabilized over the past three years. However, its annual transaction take rate (the percentage of each transaction it keeps as revenue) has still declined every year since its spinoff from eBay in 2015.
That contraction was caused by its growing dependence on Venmo and Braintree, which both generate lower transaction take rates than its namesake app. To offset that pressure, PayPal aggressively reined in its spending and bought back more shares.
What will happen to PayPal over the next year?
For 2024, PayPal expects its earnings per share (EPS) to grow 2% to 3% on a generally accepted accounting principles (GAAP) basis and by the "high teens" on a non-GAAP basis (which excludes its stock-based compensation and other one-time expenses).