In recent years, PayPal’s stock has risen. And there’s a number of reasons for this. A combination of factors such as a strong performance in core business areas, strategic initiatives for enhancing the platform itself and more of a focus on returning value to shareholders with stock buybacks has all contributed to this rise. It’s not been smooth sailing though, for the company has had many setbacks over the years especially after the pandemic and more competitive payment methods appearing on the scene. That being said, it’s managed to stabilise its growth and expand to focus on being profitable. Here’s an in depth look.
Trusted brand
One reason for PayPal’s continued stability is a simple one, trust. Early on PayPal established itself as a reputable online digital payment method to consumers. And it’s been around for a long time helping to continue this trust. This has allowed for a high customer retention rate around the world. Speaking of around the world, the brand has huge global visibility and is available in 200 countries and regions. A lot of this has to do with the fact that it’s got great security in place and solid buyer protection systems. Coupled with the speedy transaction times and limited fees, it has retained its popularity as a top brand.
Diversifying across industries
PayPal’s expansion into fast-growing industries has played a crucial role in its consistent share growth across years. From mainstream e-commerce, retail and freelance platforms, to digital entertainment and gaming platforms like casinos accepting PayPal, the company’s payment infrastructure is deeply embedded in sectors relying on speedy, secure transactions. With this wide adoption comes increases in transaction volumes. Consequently, this leads to investor confidence boosting stock prices and shares.
Innovative products
PayPal has also smoothly moved with the times, especially when it comes to the financial sector. Other competitors such as Klarna have utilised the strategic payment strategy of splitting the cost of purchases. And PayPal has joined the action opting to promote the Pay in 4 model available when using PayPal at the checkout. Catering to this increased consumer demand means that PayPal is continually offering what users want. Alongside this, PayPal also has credit options with attractive interest rates, once again meeting user needs. As such, it’s able to stay ahead of fintech trends, making use of them in a timely fashion further boosting its appeal with investors.
Growth in transaction volume
In recent years, PayPal has also seen an increase in transaction volume growth. Much of this growth came through unbranded transactions which shows that there’s a lot of success in their payment processing platform for businesses. The branded side also grew, and Venmo, the mobile payment service under PayPal, also saw a solid increase in payment and transaction volume. All of this lends itself to a clear sign that there is an increase in user engagement. This is also exemplified in the increase of transaction numbers per account being recorded. It clearly indicates that not only are people using PayPal, but they’re also choosing to stick with and use the services more frequently. Once again, for investors, this is a positive sign and one which encourages the purchase of stock in the hopes of continued growth.
Undervalued stock
PayPal is also currently relatively low, trading at a price-to-earnings (P/E) ratio under 14. This shows the stock’s price in relation to its earnings. So a lower P/E ratio shows that the stock may be undervalued. There’s continued predicted growth for PayPal too, as much as 10% in 2025 which makes the potential for PayPal stock rather attractive. PayPal also likes to reward its shareholders and has plans to generate more in free cash flow this year too. Some of this will be used to repurchase its own stock, which can increase the shareholder value as well.
With all these points in mind, it’s no wonder that PayPal stocks are growing. Yes, the company has had its downsides, but it’s got through the rocky periods too. And this in its own right is an attractive sign for investors who want to know that the company can get itself out of a tight hole if it needs to.
