Is PayPal a good stock to buy?
PayPal's revenue growth has accelerated in double digits, but is the success short lived?


One of the key trends of the past few decades has been the rise of e-commerce. While it has receded from the highs seen during the pandemic, when the closure of most shops meant that nearly 40% of retail sales in the UK were made online, it still accounts for 16% of all sales in the US and more than a quarter in Britain. This has been good news for companies such as Amazon, and bad news for the high street. However, rather than risking money on a particular retailer, it may make sense for traders to buy one of the most important gatekeepers in the world of e-commerce.
The company in question is, of course, PayPal (Nasdaq: PYPL). PayPal is one of the most popular electronic payments platforms, used for everything from retail transactions to services such as Airbnb. It has 426 million active accounts across 200 markets. While this platform still provides the core of PayPal’s revenue, growth has slowed drastically since Covid-19. This is partly due to the general downturn in household spending. However, another factor, and one that seems to have rattled many investors, is intensifying competition from rival services provided by Google and Apple. These services have threatened to entice customers away from PayPal and forced it into defensive price cuts, hurting its margins.
PayPal bounces back – a steep road to recovery?
The good news is that PayPal seems to have found a way out of its problems by broadening its business. The large number of different payment options on the market may be bad news for its main branded payments business (although it is still growing), but it has created an opportunity for its Braintree subsidiary, which serves as a simple single gateway to connect firms with these various payment providers, without having to deal with them individually. At the same time, PayPal is trying to appeal to younger consumers with Venmo, a peer-to-peer transaction service. It is making tweaks to its main product as well, including a new feature aimed at making it quicker and easier to buy products as a guest (without setting up an account with the retailer).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
These changes seem to be helping PayPal bounce back. Revenue growth is increasing by double-digits again, with the volume of transactions processed rising by 14%. Revenue in 2023 was almost double 2018’s levels, with earnings increasing by a similar amount during the same period. After a few years in which they started to dip, operating margins have rebounded to record levels and the return on capital employed, a key gauge of profitability, has similarly increased to 15%. Despite this continued success, the stock is priced modestly at 14.4 times 2025 earnings.
Note too that while the shares are still more than 75% down from their peaks in 2021, they are now trading above both their 50- and 200-day moving averages. I suggest you go long at the current price of $67 at £50 per $1. Put the stop loss at $48, giving you a total downside of £950.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.
He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.
Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.
As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.
Follow Matthew on Twitter: @DrMatthewPartri
-
‘I installed a heat pump in my home – here are five things I’ve learnt’
From the size and noise of a heat pump to how much it costs to run one, Ruth Emery reveals what she’s learnt after installing one in her home six months ago
-
3 ways to work out if a stock is good value
The only thing you can really control in investing is the price you pay for an asset – but how can you tell if you’re getting a good deal when it comes to the price of a stock?
-
Two ways to tap into monopoly profits from airports
Most investors can’t get their hands on airports. Here are two ways you can
-
Fat profits: should you invest in weight-loss drugs?
The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategy
Ramsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs
-
How to invest in the booming insurance market
The insurance sector is experiencing rapid growth after years of stagnation. Smart investors should buy in now, says Rupert Hargreaves
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
BP's 'long, painful decline' – and why next year could be even tougher
Opinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global markets
Opinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
-
Falling revenues and mounting debt spell trouble for Jumia Technologies
Struggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.