Why is PayPal Stock So Cheap?

Don’t sell PayPal on cash making a comeback.

Andrew Willis 25 August, 2023 | 1:12AM
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Key Takeaways for PayPal Stock

  • PayPal is focused on margins amid competition from traditional payments and Apple Pay
  • There may be a reversal of pandemic positives for PayPal but consider how much is priced in
  • PayPal has an edge in fraud prevention and is still a preferred partner in the online space


Andrew Willis: A new CEO is stealing the show at PayPal (PYPL), but investors should instead be focused on how e-commerce evolves over the coming years. Because no change in leadership will change the headwinds in the near term, as competition in the payments space picks up and cash looks to make a comeback.

Make or Break Time for PayPal Stock

As senior equity analyst Brett Horn puts it, we don’t expect dramatic changes with a new CEO at PayPal because it would be very difficult to veer from the company’s short-term focus on margins and returning capital to shareholders.

So what do investors expect from Paypal stock now? Our downside scenario already assumes increased competition from traditional payment methods and the rise of new offerings like Apple Pay and margins at a measly 18% by 2032. And the resulting downside estimate is still above the price of PayPal stock today.

Investors should consider that PayPal is still a preferred partner in the online payments space. In the industry, only around 50% of transactions convert, or complete. With PayPal? It’s closer to 90%. That’s a valuable form of payment – even if cash remains king.

For Morningstar, I’m Andrew Willis.

bulls PayPal Stock Bulls Say

  • There is still plenty of runway for growth in electronic payments. Electronic payments only surpassed cash payments on a global basis a couple of years ago.
  • The scalable nature of the business should allow PayPal to improve its margins over time.
  • PayPal’s long-running experience in online payments is a unique asset that is becoming more valuable as e-commerce becomes a bigger piece of the pie.

bears Bears Say

  • The separation between online and point-of-sale transactions is blurring, and PayPal may increasingly come into competition with larger companies in the future.
  • Alipay and WeChat provide examples of how governments could favor local players, and this could shut PayPal out of a number of emerging market opportunities.
  • Opportunities to monetize Venmo could be limited.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Apple Inc214.29 USD-1.10Rating
PayPal Holdings Inc59.12 USD-1.68Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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