PayPal’s stock tells a story few long term investors expected. After trading above $300 during the pandemic driven surge in digital payments, the shares now sit below $50 as growth stalled and confidence in management steadily eroded.
Recent quarters have reinforced those concerns. Revenue growth remains stuck in the single digits, and branded checkout, the segment management has repeatedly positioned as the future profit engine of the business, has delivered only modest volume growth. That matters because branded checkout carries meaningfully higher transaction margins than unbranded processing and sits at the center of PayPal’s profitability model. When that engine fails to accelerate, the entire investment thesis weakens.
For a company that helped define modern ecommerce, this is a difficult position. PayPal was once synonymous with online payments. It enabled merchants and consumers to transact digitally long before mobile wallets, embedded payments, and platform native checkout experiences existed. That legacy now stands in sharp contrast to its current position in a far more crowded and faster moving payments landscape.
Growth Without Direction
Under former CEO Dan Schulman, PayPal pursued expansion through acquisitions and aggressive user growth. That approach aligned with the era, when scale itself was rewarded and engagement metrics often mattered more than profitability or product differentiation. Over time, however, the limitations of that strategy became apparent. Growth increasingly relied on low quality volume, and the company struggled to articulate a clear product vision that extended beyond processing payments.
Venmo illustrates the issue clearly. It achieved viral adoption and built a strong social layer that differentiated it from PayPal’s core product, yet monetization and product innovation lagged for years. Engagement was high, but the platform remained underleveraged relative to its potential. The asset was powerful, but it never became a true growth driver.
The rumored acquisition of Pinterest marked a turning point for investor confidence. The market reaction was swift and deeply negative, and PayPal’s public retreat from the deal suggested a lack of conviction behind its strategic direction. That episode damaged credibility and raised broader concerns about capital allocation discipline and leadership clarity.
Execution Versus Strategy
When Alex Chriss took over in the second half of 2023, optimism briefly returned. He was viewed as an operationally focused outsider with energy and discipline. His priorities were straightforward. Reduce low quality revenue, improve transaction margins, and refocus the business on higher value products such as branded checkout, Venmo monetization, and Buy Now Pay Later.
From a long term perspective, this reset made sense. Walking away from unprofitable volume requires discipline, particularly when it pressures reported growth in the near term. Transaction margin dollars improved, and Venmo revenue growth accelerated into the high teens in several quarters. These were real operational wins.
The problem was that these improvements never translated into a compelling growth narrative. Revenue growth remained muted, branded checkout did not meaningfully reaccelerate, and PayPal still failed to differentiate itself in a way that altered competitive dynamics. The company was fixing leaks, not building a stronger moat to prevent new ones from forming.
Recent leadership signals reinforce the board’s belief that PayPal’s challenges are primarily about execution. The consistent message from management has been that the strategy is sound and that underperformance reflects speed, focus, and macroeconomic softness rather than a flawed strategic foundation.
This framing misses the core issue.
If the strategy were working, better execution would already be visible in the numbers. Instead, PayPal continues to post single digit growth in the areas management itself describes as central to its future. At the same time, competitors operating in the same macro environment are delivering faster growth and more seamless user experiences.
Blaming execution implies the company is doing the right things but not doing them well enough. Blaming macro conditions suggests the weakness is temporary and external. The evidence points to something more structural.
A Changing Payments Landscape
The payments ecosystem has evolved rapidly. Payments are increasingly embedded, invisible, and integrated directly into commerce platforms. PayPal, by contrast, still largely operates as an external layer. That distinction matters in an environment where merchants value simplicity, speed, and native integration over brand recognition at checkout.
Technical barriers to entry have also fallen dramatically. APIs, fintech infrastructure providers, and AI assisted development tools make it far easier to replicate payment features and checkout experiences than it was a decade ago. New interfaces can be launched quickly, and any advantage tied solely to features tends to be short lived.
What PayPal does have is far more difficult to replicate. It possesses decades of transaction data across hundreds of millions of consumer accounts and millions of merchants. It sees real commerce activity across geographies, categories, and economic cycles at a scale few companies can match. In an era where data drives personalization, fraud prevention, underwriting, and merchant insights, this should be a defining advantage.
So far, PayPal has not translated that data advantage into a differentiated product layer that creates durable, incremental revenue streams. Management frequently cites macroeconomic softness to explain slow growth, but many adjacent fintech and ecommerce platforms have not reported similar levels of weakness. That suggests the challenge is at least partially company specific.
The Road Ahead
PayPal is no longer viewed as a growth oriented fintech leader. It is increasingly framed as a turnaround story with meaningful execution and relevance risk. The company still generates strong cash flow and retains scale, brand recognition, and deep merchant relationships. Venmo remains highly engaged among younger users, and Buy Now Pay Later has demonstrated traction.
The ingredients for a strong business are still present.
What is missing is a clear demonstration that PayPal can innovate at the product level and leverage the data and network into offerings competitors cannot easily replicate. Until that happens, PayPal is not a core growth holding and more looks like a prolonged recovery story, at best. For this reason, it is being removed from the Watchlist.
