Here’s Why PYPL Stock Sucks

PayPal stock $pypl is trading down 20% since the last time we checked in - 18 months ago - at which time we said pypl stock wouldn't be interesting at any price. That's only because we invest in two areas - disruptive growth and dividend growth - and PayPal's days of disruption appear over. The problem PayPal has is trying to resurrect growth as management talks about focusing on current accounts. That land-and-expand strategy comes with lowering take rates, so even through transaction volumes are increasing, revenue growth isn't keeping up at the same pace. PayPal investors who look back at the lofty share prices of old need to remember those were justified by management's claim of hitting $50 billion in revenues by next year. That doesn't appear to be happening as 2023 expects to see around $29 billion. PayPal's problem is that the market is now seeing them as more of a value stock than a growth stock.
RESEARCH PIECES USED IN THIS VIDEO:
1. PayPal Stock is Falling: Buy or Sell?
• PayPal Stock is Fallin...
2. Checking in With PayPal, Adyen, & Block
• Checking in With PayPa...
3. PayPal Stock Plummets: Is it a Good Buy?
www.nanalyze.c...
4. Checking in With Payment Stocks - PayPal, Adyen, & Block
www.nanalyze.c...
5. Remitly Stock: A Challenger to Western Union?
www.nanalyze.c...
CHAPTERS:
00:16 PayPal's market leadership
01:00 Where's the growth?
02:54 PayPal's account growth stalls
05:37 Payment volume vs take rate
07:18 Why is PYPL buying back shares?
09:59 Why PayPal stock sucks
11:18 Expected sales growth
12:41 Key metrics for PayPal investors
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This video is brought to you by Nanalyze, a media and research firm founded by finance professionals with decades of experience. We share insights about #techstocks #techinvesting and #dividendgrowthinvesting in a language that is future-proof and easy to understand.
Read all the Nanalyze Premium articles you'd like for free! Sign up for a 30-day trial of our monthly subscription with no strings attached: www.nanalyze.c...
DISCLAIMER: Our content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, along with independently researching and verifying, any information contained within our KZbin videos or on our website, whether for the purpose of making an investment or otherwise.
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#paypalstock
#pypl
#pyplstock
$pypl

[@Nanalyze]

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[@boratsmagadijev940]

Bag holder here, got hooked on that 50B$ 2025 story... Hope new CEO makes some smart moves 😭 My plan is to hold the bag until 2026.

[@Nanalyze]

If you believe in the company then adding shares to reduce cost basis might make sense (just don't get overexposed to any single stock). A new CEO is a great catalyst for change. The announcement of new functionality all sounds good, but we'll likely need to see that declining take rate reverse for proper growth to resume. For us this falls in that grey area between growth and value so we have no dog in the race.

[@wyzyguy726]

Fellow bag holder. Looking for signs of life on this earnings..

[@facadcofac409]

I used to be a merchant using PayPal. After they would'ent return fees in a refund. I found another preccessor that would and enabled PayPal as secondary and cut their processing by 90%. Stop screwing your customer, PayPal.

[@Nanalyze]

We stopped using them for paying contractors because their fees were way too high. The fact they don't return fees for refunds really sucks, agree.

[@CC_2617]

Who do you use for processing?

[@yourgflikesit]

Stripe also don’t return fees for refunds. So where else do you go lol. The “other” 18% of the market, but then they’ll turn around and keep fees for refunds also. Stripe didn’t keep fees for refunds early on. They all change, they all increase fees.

[@brianmalone3635]

I really appreciate the straightforward way you present the information. It can be easy to get lost in all the financial metrics. I learned something new from your clear explanation of take rate, total payment volume and its relation to revenue. Now I have something useful to keep in mind for future earning reports. Thanks!

[@Nanalyze]

That's what we're here for. To provide insights that help people become better investors. Thank you for the feedback!

[@thepixalking6589]

I own PayPal, but I like listening to contrarians to check my decision bias. You make good points. Now I will re-evaluate. I do think the new CEO could have a decisively positive effect on the company.

[@Nanalyze]

These days it seems like applying critical analysis to investing is the exception, not the rule. The new CEO is now finding out where all the bodies are buried and learning what exactly he's inherited. It's a good catalyst for change, but that change isn't always good. We'll see how they get on.

[@3handedpoker]

I also own PayPal, I don’t know if this video was even negative, I think it’s good to know we are in more of a value stock as of today and being realistic of why we are in value territory is good, also is value investing bad? Warren buffet is a value investor, but we have growth catalysts on the books. And this can be a surprise. I also think that the video is called paypals stock sucks, not Paypal’s business sucks and he defiantly defines the difference here and I believe we can all agree the company doesn’t suck and that this video is more reasoning to why the stock sucks at this moment. Which is great for an optimistic buyer who does some research. I’m in this stock to beat the snp not to get rich over night but if we manage to go back into growth with some of the new agenda’s using ai advertising, cash back, social media venom and the other growth ideas PayPal is trying to execute at the moment, then we have a growth stock valued as a value stock. Really enjoyed this video as it made me feel better as an investor in PayPal.

[@3handedpoker]

Social media venmo+ apple auto corrected me.

[@factotums]

PayPal seems like one of the first 'legacy' companies of the digital era, in that I mean I agree that they seem to be transitioning into a value company. You can't seem to throw a rock without hitting a PayPal acquisition, at the same time I don't know if it has done any good. I mean you can send money to people with the standard PayPal app, do they really need Venmo? So I don't know. This is a weird time for Fintech. You have brand new stadiums being financed by some code a 17 year old wrote when he was bored. Still the PayPal brand is sort of comforting when dealing with things like, I dunno, putting your credit card number onto a Tajikistan startup company. Personally I treat Fintech like Biotech, I usually just buy a sector ETF because it all seems crazy at the moment.

[@Nanalyze]

Great comment here, thank you for sharing your thoughts!

[@nicolasrodriguez7537]

As a merchant using PayPal…they charges the highest fees. But, in my numbers PayPal conversion rates are higher. So, i sell more. Is just me?😂

[@Nanalyze]

Having PayPal certainly seems to increase conversions, despite their high fees.

[@jaykrizzle]

As a merchant and a customer, paypal is always the last resort. Awful company

[@Nanalyze]

We don't disagree with you! Another company that falls into that category is Facebook. They have no customer support. The only way to get them to help you with rampant scammers is to have your State Senator get involved. It's that bad. When did companies believe it was acceptable to let customer service become total shite. (End rant.)

[@jaykrizzle]

@Nanalyze Yes I (and others in the same hobby business) basically have to do all the legwork in resolving fraud issues, and the steps required of us are extreme and exorbitant with minimal to no support as you say. I certainly won't ever buy the stock of a company I hate. The channels pumping the stock as a value no brainer don't seem to address the actual root issues in their discussion

[@Nanalyze]

Agree. Sorry to hear you have to deal with such rubbish. We fortunately don't have to deal with a lot of fraud, but when such rare instances have occurred in the past, we had the same experience.

[@Nanalyze]

Dear PayPal. Trying to update our business address right now - the most basic of tasks. Your average Golden Snub-Nosed Monkey could have done a better job building this error-ridden UI. "Something went wrong! Try again." What went wrong you muppets? How hard is error handling? Maybe you should take that DEI tripe and shove it up whoever's ass is cramming it down everyone's throats and hire based on competency. Maybe then you'll be able to accomplish even the most basic of tasks without looking like a bunch of tool bags. Sincerely, One of Your Customers You're Not Listening To.

[@davidcunningham2074]

so many pundits are trying to push this stock. thanks for debunking it. i have never had any need to use it.

[@Nanalyze]

Armchair pundits are a dime a dozen these days. Few actually analyze the companies they invest in while most just jump on the bandwagon and start parroting the same talking points everyone else does. What PayPal needs to do is offer investors a better look under the hood of what's actually driving growth. The new CEO should revamp the investor relations team so that investors can better understand what this business does. More investor deck revamps, less shock and awe press releases please.

[@AyjayAlleyway]

Doesn’t matter if you need to use it, 500 million people do.

[@jasonjunior1848]

So they just need to lower costs? That’s an easy fix. Thank you for the bearish input . New CEO is fixated on just that , and more innovation . Let’s see how earnings go

[@Nanalyze]

Watch the video first before you comment please so that you can add value to our audience.

[@jasonjunior1848]

@@Nanalyze I did. And that seems to be the one thing that needs changed to turn the company around. Amongst other things sure, but cutting costs would turn it all around. That’s my understanding of it but hey, I don’t know anything im just commenting my thoughts on this public platform 🤷‍♂️ again thanks for the video

[@Nanalyze]

You're most welcome! :) The video criticized the lack of revenue growth, not profitability.

[@jasonjunior1848]

@@Nanalyze I got you. Ok. Roger that

[@Nanalyze]

@@jasonjunior1848 Also when the focus pivots from revenue to profits, that usually when a company starts to pivot from growth to value and the valuation adjusts accordingly.

[@filipepina1193]

Facebook it was at €100 a year ago, the market also saw many problems despite sales growth being constant.

[@Nanalyze]

Apples to oranges. Invest in companies, not stocks.

[@filipepina1193]

Money is money, Time give reason to money.

[@Nanalyze]

We hadn't heard that quote before. Here's one we like better. It's about time in the market, not timing the market.

[@yourgflikesit]

Could be worse, could be holding intel, who’s revenue is declining.

[@joepiv]

@@yourgflikesit Intel is a great example of a company that became lax with their success.

[@fendermon]

Major credit cards reimburse for fraud so I don't see the need for a third party in the middle, unless it is neatly tied to hardware like Apple Pay. If I spent ten minutes trying to resolve a problem with Paypall..it's ten minutes too many.

[@Nanalyze]

Totally agree but customers still feel uncomfortable giving out their credit card information.

[@azulsimmons1040]

Paypal is a hyper-competitive market segment against a lot of big players. I'm not sure how they win that. They were a first mover in payments when Paypal was big, but now they're another player in a crowded field. I used to use Paypal on Ebay, but since Ebay now offers other options not sure what accretive value they offer. They don't seem worth the investment.

[@Nanalyze]

Being the leader gives them an advantage but there will always be pricing pressures. PayPal charges way to much already to be honest, at least for our merchant use cases.

[@AyjayAlleyway]

They keep growing, so you’re obviously wrong.

[@Nanalyze]

@@AyjayAlleyway Your comment adds zero value. Please engage with the comments and content and try to add some value so that we all benefit.

[@Dan-Weston]

I've seen so called "value investors" buy PayPal and I've seen so called "growth investors" buy PayPal. I've never seen this confluence of two styles quite like this, either way Apple is taking their lunch money and all they have to offer is a deteriorating quality checkout button. Great video!

[@Nanalyze]

Glad you enjoyed the piece, thank you!

[@kahvac]

I think PayPal lost a lot of users when they said they would fine people for misinformation.

[@Nanalyze]

That was a huge mistake on their part. Cannot believe a company would actually try that bs in America. China that might fly, not in the home of the free .

[@kahvac]

Seems like the stock price started going down around that time ? Maybe coincidence ?@@Nanalyze

[@Nanalyze]

Probably. Most people don't pay as close attention as they should to this stuff.

[@AlBergstein]

I also didn't see any mention in your analysis of the growth of Apple Pay and Google Pay in all this I know myself I'm using Apple Pay more than PayPal at this point and that's been a shift over the last year. The convenience of Apple Pay and Google Pay seems to be headwind against PayPal being able to expand the business rather than just milk more money out of the existing customer base, I have recently, in the last year I've been long with PayPal, but I'm certainly questioning the decision for how much longer I'll stay in

[@Nanalyze]

Good point. In researching this piece we saw varying opinions about the extent to which Apple Pay is capturing market share from PayPal. To go down that path we would have needed to start analyzing all competitors and that just didn't end up being in the scope of this presentation.

[@yourgflikesit]

If you want to cover the whole market, go visa or Mastercard who are forced into every transaction regardless of who “processes” it

[@DGA-808]

8:44 divestiture of happy endings 😂 Great video. Cheers

[@Nanalyze]

;) Thank you for the praise! We'll keep it up.

[@ASenseofCapital]

What for me the most akward about Paypal is actually not the business itself but the perspective of the investors: Many of them rate it as a bargain just because It's far below the IPO price and they assume it might be the next turnaround story like Meta. In my opinion, the reality couldn't be more away...

[@Nanalyze]

Someone brought up Meta in the comments section here. Apples to oranges. Because everyone and his brother is now a social media "finance expert," most newbie retail investors are learning some very bad habits. And Meta the company is still pissing away massive amounts of cash on "the metaverse," regardless of what the stock might be doing.

[@digitalrock3965]

You see here is the thing. The new CEO from last earnings explicitly said they are a ‘growth company’. I don’t know about you all, but I’m fully on board with this new management team.

[@Nanalyze]

The CEO said it's a growth company? Let it be so! ;) Here's a piece on how growth or value gets determined by the financial experts over at MSCI: kzbin.info/www/bejne/laanXpanetGbo8k

[@RaiiNdroPz08]

Great video! I feel like all the arguments you made are of management nature or whatever you want to call it. You mentioned it: rev growth, tpv growth but take rate going down. To me that sounds like theres upside in terms of profitability. Since active consumer count and also in my opinion stagnating payment volume is priced in quite accurate, i bought some shares today. :) Also Alex chriss might bring some fresh winds into the company and make the market forget the past non visionary management. We'll see!

[@Nanalyze]

Our arguments are more business model related, less management related. And they pertain to growth, not profitability. The company does retain their leadership position which is good, so let's see if they can get back to growing like a growth company. As you said, maybe new management will make that happen, but fresh leadership can also go both ways.

[@steenpedersen8526]

I missed a conclusion on this one - is Palpal actually cheap at this point?

[@Nanalyze]

Depends on if you consider it a growth stock or a value stock. It's looking more value, so perhaps it's being fairly priced at the moment.

[@mickeybeavison1053]

Good video surprised no mention of leadership changes

[@Nanalyze]

That's because everyone else won't stop talking about it ;) We don't have much to say about leadership in companies as the only way you'll be able to assess someone's competency is by working with them, generally speaking. From the outside, we focus on whether or not management follow through on what they say.

[@abrahamjacob8749]

Thank you. Well done!

[@Nanalyze]

You're most welcome!

[@mrmurky1118]

I keep telling ppl PayPal is not a growing company and it’s why the stock is like this but they won’t listen.

[@Nanalyze]

The CEO says it's a growth company because it's his job, but the proof is in the pudding.

[@mrmurky1118]

@@Nanalyze the fact that leadership couldn’t make things work with eBay as well is a huge red flag. Fintech and e-commerce goes hand in hand. Many KZbin finance gurus pumping this stock. It’s insane. Thanks for clearing that up.

[@Nanalyze]

KZbin finance gurus are coming out of the woodwork these days. ;) You're most welcome!

[@davidgirello8482]

But what's wrong being a value company? According to market statistics I read on a paper, only 16% of purchases in the US are currently online, therefore there's a huge room in the next years. Why shouldn't PayPal participate to this growth of sales in the next years?

[@Nanalyze]

@@davidgirello8482 Nothing wrong with value companies at all. Over half the assets we manage are in value stocks (our dividend growth investing strategy, Quantigence). It's the grey area between growth and value that we don't find overly compelling. Regarding online sales penetration, the Rona showed us that online sales surged and then reverted back to the norm. Reasoning for "huge room" for growth in online sales needs to provided more than just saying "it's 16% so it should be much higher." Know what we mean?

[@brianwest7344]

this is an example of why i like dividends and not buybacks. Paypal have wasted 30 billion on buybacks

[@Nanalyze]

Buybacks increase earnings per share, and consequently dividends per share. Were PayPal to start paying a dividend then they'd be firmly placing themselves in value territory which is apparently not where they want to be.

[@cestmoilance]

Would agree before new ceo presented new strategy. Now seems to have plausible new growth channel

[@Nanalyze]

So you might be referring to the "shock and awe" announcement by the company relating to new functionality that's expected to drive revenues. New product development is expected of any company, and it remains to be seen if this moves the needle. This video was about why the stock was languishing, not their plans to fix that which are likely being discussed ad nauseum by the all the bullish pundits out there. We'll see what they guide to for 2024 and if they can stabilize that declining take rate.

[@cestmoilance]

@@Nanalyze​​⁠ ​​⁠I didn’t hear you mention its AI push and strategy to monetize the data it collected throughout the years to help small biz advertise. I agree with what you said when it was under the old leadership. But given the significant shift in literally everything from the new ceo, it deserves another chance, let’s see how it executes its new strategy

[@Nanalyze]

@@cestmoilance Nearly every company out there is peppering their investor decks with mentions of AI. It's a given these days. Based on the comments made on this video it seems like everyone read the press releases which isn't what the video was about.

[@sagebeer]

I used paypal once and lost $100, reported the problem. Never used it again.

[@Nanalyze]

We have our own bad experiences that we kept out of this analysis ;)