Should We Consider Investing in PayPal Shares by 2025?
After surmounting a tough phase, PayPal (PYPL 3.25%) is gearing up for a resurgence with the new leadership of CEO Alex Chriss, who assumed the role in 2023. Chriss brings a renewed focus on innovation and serving small businesses, and the company is on a mission to reaccelerate growth following a "transition year" in 2024.
PayPal's stock price surged 35% in 2024, as investors grew confident in the company's march towards growth. However, despite this upward momentum, the stock is still down 73% since it peaked at $310 per share in 2021.
Positioned for growth, PayPal will look to build on its success in 2025. The stock currently offers an attractive valuation, leaving many investors questioning whether now is the ideal time to invest in the company.
A Tough Stint for PayPal
PayPal, a top payment service provider, has cemented itself as a popular digital payment app spanning multiple generations, according to Ascent's survey of 2,000 Americans. During its latest quarter, the company handled $422 billion in transaction volume through its 432 million active accounts.
Despite its significant presence in the payment industry, PayPal has been criticized for its lack of clear growth initiatives and dwindling transaction take rates. In fact, the take rate - a key financial metric for the company - has declined annually since 2015. This undermining of margins and lack of attractive growth opportunities has left investors on edge.
Transforming and Reaccelerating Growth
Upon becoming CEO, Alex Chriss wasted no time in taking control and applying his Intuit experience to PayPal, as he led the small-business and self-employed group at the tech company as Executive Vice President and General Manager. With a renewed focus, PayPal has embarked on a series of initiatives to rekindle growth and build upon a strong foundation.
One such initiative is the sustained growth of Braintree, PayPal's unbranded checkout option. Although Braintree boasts impressive growth in fintech's business, its lower margins contrast with PayPal's branded checkout option. As a result, Chriss and PayPal are revamping their branded checkout solution, with SMBs as the primary target through PayPal Complete Payments Platform.
Attracting Big Names with Improved Checkout Experience
Chriss aims to distinguish PayPal's platform through a superior checkout experience and one-click checkouts called "Fastlane," which is expected to reduce checkout time by 32% while helping merchants convert more sales. Big-name companies, such as Salesforce, Adobe, and BigCommerce, have already joined PayPal's fold.
The company has also become an additional processor for Shopify Payments in the U.S., with its branded checkout integrated into Shopify's system. This streamlined process provides SMB owners with a more straightforward means of managing orders, payouts, and reporting.
PayPal has also partnered with Amazon, granting SMBs using the Buy with Prime service access to its checkout option. Expanding on this collaboration in 2025, the company aims to provide Amazon and PayPal account links, an area Chriss identifies as ripe for growth.
Should You Invest in PayPal?
PayPal's recent performance and renewed growth initiatives are inspiring confidence in investors, as the stock has climbed 35% in the past year. The volume through PayPal Complete Payments has increased by 40% during this period.
Chriss is emphasizing the company's consumer spending data, with plans to capitalize on AI-driven targeted discounts and personalized shopping recommendations. As digital marketing grows at an annual rate of nearly 15% by 2030, PayPal is well-positioned to participate in this trend.
PayPal currently trades at a reasonable valuation, with a price-to-earnings ratio of 19.6 and 15 times next year's earnings, making it an attractive investment option. The company's strategies, partnerships, and focus on SMBs make it an intriguing stock to hold for several years.
In light of PayPal's renewed growth strategies under CEO Alex Chriss, many investors are considering investing in the company. With a current P/E ratio of 19.6 and a forward P/E of 15, PayPal presents an attractive valuation in the finance sector.
Following the successful implementation of initiatives like Fastlane, which promises to reduce checkout time by 32% and increase conversions, finance gurus are analyzing whether investing in PayPal could yield significant returns in the long term.
