PayPal (PYPL)

PayPal (PYPL)

Is PayPal stock a good buy?

In this article we review PayPal stock to determine if it’s a good buy, sell, or hold. 

Table of Contents

Tykr Rating

  • Summary:  On Sale
  • Score:  56/100
  • MOS:  0%
  • Share Price:  $102
  • Sticker Price:  $103

The previous review on PYPL was completed on February 7, 2022.

  • Summary: On Sale
  • Score:  70/100
  • MOS:  68%
  • Share Price:  $126
  • Sticker Price:  $399

PayPal Company History

Have you ever heard of the “PayPal Mafia”? This refers to the individuals who were part of PayPal in the early days and went on to establish other highly successful businesses.

PayPal was originally established by Max Levchin, Peter Thiel, and Luke Nosek under the name Confinity. The company was originally focused on software security for handheld devices. They had no success with that business so they pivoted to a digital wallet. In 2000, Confinity merged with, an online banking company founded by Elon Musk. Later that year, Elon decided to terminate other operations and focus on solely on Confinity. In that same year, Elon replaced Peter Thiel as CEO of and in 2001 renamed the company to PayPal. In 2002 PayPal went public at a share price of $13.

Below is the original roster. Essentially a dream team of future tech leaders.

  • Peter Thiel: Co-founder of Palantir in 2004 which went public in 2020. Co-founded Founders Fund, a VC firm, and was the first investor in Facebook. Other notable investments include SpaceX, Stripe, Airbnb, Spotify, Twilio, and Lyft.
  • Elon Musk: Co-founder of Tesla. Founder of SpaceX, Neuralink, Open AI, and The Boring Company.
  • David O. Sacks: Founder of and Yammer.
  • Roelof Botha: Became a partner at Sequoia Capital, a VC firm that has invested in DoorDash, HubSpot, GitHub, Electronic Arts, Instagram, LinkedIn, MongoDB, NEXT Trucking, and more.
  • Steve Chen: Co-founder of YouTube.
  • Jawed Karim: Co-founder of YouTube.
  • Reid Hoffman: Founder of LinkedIn.
  • Ken Howery: Partner at Founders Fund.
  • Joe Lonsdale: Co-founder of Palantir.
  • Russel Simmons: Co-founder of Yelp.
  • Yishan Wong: Become CEO of Reddit.

And that is just the beginning. There were many other talented individuals that went on to lead successful tech businesses.

PayPal Business Model

How does PayPal make money?

PayPal is used in 200 countries/territories and supports 25 currencies.

PayPal generates revenue primarily through transaction fees. For those of you who know me, know that I love both B2C and B2B SaaS as these models are monthly recurring revenue but transaction fee models are superior. With transaction fee revenue models, the fees can continuously stack up with no upper limits. It’s also important to emphasize the low friction aspect of transaction fees as consumers and businesses typically accept the fees as the “cost of doing business.” 

Overall, with fee-based models, you’re not selling a product or service. There is no friction or negotiation in the sales process which is a brilliant business model. You’re simply placing a tool in the hands of consumers and businesses and the more they use the tool, the more money PayPal generates.

Here is a breakdown of PayPal’s services and how the company generates revenue.

Consumer Services

  • Buying with PayPal – Free
  • BNPL (Buy Now Pay Later) – Pay in 4 installments is free. Monthly payments include interest rates.
  • Buying and Selling Crypto with PayPal – Transaction fees
  • Accepting donations – Transactions fees
  • Sending money to a friend with a bank account – Free
  • Sending money to a friend with a credit card – Transaction fees
  • Sending money to a friend internationally – Transaction fees
  • Currency conversions – Transaction fees
  • Withdrawal PayPal balance to the bank (1 – 3 days) – Free
  • Withdrawal PayPal balance to the bank (immediately) – Transaction fees

To see detailed PayPal fees for consumers, click here.

Business Services

  • Accepting payments with PayPal – Transaction fees
  • Accepting international payments with PayPal – Transaction fees
  • Accepting BNPL – Transaction fees
  • Accepting PayPal QR code payments – Transaction fees
  • Accepting PayPal donations – Transaction fees
  • Payflow Pro (Payment Gateway) – Transaction fees
  • Chargebacks – Transaction fees
  • Disputes – Transaction fees
  • Currency conversion – Transaction fees
  • Accept E-checks – Transaction fees
  • Withdrawal PayPal balance to the bank (1 – 3 days) – Free
  • Withdrawal PayPal balance to the bank (immediately) – Transaction fees

To see detailed PayPal fees for businesses, click here.

PayPal also owns the following companies

  • Venmo – A money transfer service only available in the US
    • Buying and Selling Crypto with Venmo – Transaction fees
    • Withdrawal Venmo balance to the bank (1 – 3 days) – Free
    • Withdrawal Venmo balance to the bank (immediately) – Transaction fees
    • Venmo Visa and Venmo Visa Signature cards – Interest rates
    • Venmo debit card – Transaction fees
    • Venmo Cash-a-Check, let’s users cash their paychecks – Transaction fees
  • Xoom – A global money transfer service available in 39 countries. See the full list here. This business generates revenue from transaction fees.
  • Braintree – A high-converting digital wallet for businesses located in 45 countries. This business generates revenue from transaction fees.
  • Happy Returns – A return service that makes returns beautiful for consumers, businesses, and the planet. The company works with over 5,000 different store locations in the US, Canada, and Europe. The service costs $500/month if you don’t use PayPal to accept payments however the service is free if you do use PayPal to accept payments. This is a strong motivator for businesses to use Happy Returns.
  • Hyperwallet – A global mass payment platform available in 92 countries. This business generates revenue from transaction fees.
  • Honey – A free chrome extension available in the US, Canada, Australia, and UK that finds coupons for consumers. When a product or service is purchased by a consumer, the business selling the product or service will deliver a commission to Honey.
  • Chargehound – A dispute management system that makes handling disputes more efficient for both consumers and businesses. This business only charges a fee to businesses when the business gets paid. 
  • Paidy – A BNPL platform in Asia. This business generates revenue from transaction fees.
  • Simility – A fraud prevention platform for businesses. Fees are not clearly stated on the website.
  • Zettle – Zettle sells hardware products including POS (Point of Sale) systems, Card Readers, and Accessories. 

PayPal News

This article from shows that EPS estimate was $.54 and the reported was $.65, a surprise of 20% which caused the share price to increase by 10% in one day. 

This article from states that analysts expect double-digit percentage revenue growth from 2022 to 2025 with a share price target of $205 which means over a 100% return is in the near future.

This article from states that Elliott Management has a $2B stake in PayPal. As quoted b Elliott’s managing partner, Jesse Cohn, “The fintech company has an unmatched and industry-leading footprint across its payments businesses.” This emphasizes the extensive Moat, being located in 200 countries/territories. 

This article from lists 3 oversold ecommerce stocks that should expect nice returns in the near future including AMZN, SHOP, and PYPL.

This article from lists 7 growth stocks that are too good to ignore including NFLX, AMD, PYPL, META, ROKU, TTD, and AMZN. The reason that PYPL is on the list is that revenue growth is expected to be 10% in 2022, 14% in 20s3, and between 12% and 15% beyond 2023%.

This article from talks about how brokers like and eToro allow you to connect your PayPal account to buy stocks.

This article is from in August of 2021 but it’s one of the most important articles to pay attention to. PayPal is exploring the idea of allowing users to buy and sell stocks on the platform. With a footprint of 200 countries/territories, this would make PayPal the most accessible broker on the market. The only other broker with access to that many countries/territories is Interactive Brokers. As stated by Wolfe Resource “We see stock trading (among other incremental super-app features) as a material engagement driver for PayPal as the company looks to gain more share of the customer’s wallet and drive more funds in its ecosystem.”

PayPal Competition

PayPal (PYPL)

  • Summary:  On Sale
  • Score:  56/100
  • MOS:  0%
  • Share Price:  $102
  • Sticker Price:  $103
  • Available in 200 countries

Block (SQ)

  • Score:  39/100
  • MOS:  0%
  • Share Price:  $81
  • Sticker Price:  $82
  • Available in 9 countries

Adyen (ADYEN)

  • Score:  72/100
  • MOS:  90%
  • Share Price:  €1,784
  • Sticker Price:  €8,970
  • Available in 34 countries

PayPal 4Ms

MOS: The financials could be better. The score is 54/100 which is just barely over the minimum of 50 we like to see. The MOS is 0% because the EPS has been declining the last 5 quarters. Because the financials are not the best, we need to pay close attention but it doesn’t mean we should sell.

Meaning: The meaning is the strongest M and the reason why I like this stock. Transaction fee business models are highly scalable and PayPal has multiple businesses that leverage this revenue model. On the consumer side you have PayPal, Venmo, Xoom, Paidy, and Honey. On the business side you have PayPal, Braintree, Happy Returns, Hyperwallet, Chargehound, Simility, and Zettle. The specific features I like most, that drive significant user growth include BNPL and crypto. The one feature I’m most anxiously waiting on is the ability to buy and sell stocks.

Moat: Both Square and Adyen have solid financials and market share as well. These are two competitors to pay attention to but the global financial market is massive. There is room for PayPal, Block, and Adyen to thrive. It’s also important to point out that Stripe, a private company, is looking to go public when the market starts to rally. Stripe is a strong competitor to PayPal and is available in 47 countries.

Management: Dan Schulman is the current President and CEO of PayPal. He started his career at AT&T where he climbed the ranks over 18 years. He then moved on to where he first served as COO and eventually became CEO. During his two years at revenues grew from $20M to $1B. After he moved to Virgin Mobile USA where he served as CEO. By the time he left Virgin, it became one of the nation’s top wireless carriers, with over 5 million customers and $1.3B in annual sales. The rapid growth caught the attention of other carriers and Virgin eventually sold to Sprint Nextel. He then had a short tenure at American Express until he joined PayPal as CEO in 2014. Since his arrival at PayPal, he was instrumental in the crypto offering and he unveiled several social initiatives that have made an impressive impact on the culture. He introduced PayPal’s employee financial wellness initiative to help struggling workers by lowering healthcare costs. He created avenues for employees to receive equity in PayPal to help promote long-term savings. He announced PayPal’s $535M commitment to support black-owned businesses and minority communities in the US in an effort to close the racial wealth gap. And he also prohibited hate groups from using PayPal’s platform to accept payments and donations. Overall, Schulman has an incredible track record of building businesses and he’s highly focused on social causes.  PayPal also has a Glassdoor rating of 4.0 and Schulman has a CEO approval of 84%.

PayPal Financials

Now let’s take a look at the financials. A good value investor should be able to read the income statement, cash flow statement, and balance sheet and within 60 seconds have a pretty good idea of how the business is performing.

Revenue (Found on the Income Statement)

  • 2018: $15B
  • 2019: $17B
  • 2020: $21B
  • 2021: $25B
  • Revenue is increasing consistently which is a great sign.

Net Income (Found on the Income Statement)

  • 2018: $2B
  • 2019: $2.4B
  • 2020: $4.2B
  • 2021: $4.17B
  • Net Income levled off in 2021. Ideally, we want to see this increase.

EPS (Found on the Income Statement)

  • 2018: 1.74
  • 2019: 2.09
  • 2020: 3.59
  • 2021: 3.55
  • EPS increased substantially in 2020 but leveled off in 2021. Similar to the net income, we want to see this number increasing. 

Free Cash Flow (Found on the Cash Flow Statement)

  • 2018: $4.6B
  • 2019: $3.8B
  • 2020: $4.9B
  • 2021: $5.4B
  • Free Cash Flow slightly increased in 2021 which is a good sign.

Total Assets (Found on the Balance Sheet)

  • 2018: $43B
  • 2019: $51B
  • 2020: $70B
  • 2021: $75B
  • Total Assets have increased consistently which is a great sign.

Total Liabilities (Found on the Balance Sheet)

  • 2018: $27B
  • 2019: $34B
  • 2020: $50B
  • 2021: $54B
  • Total Liabilities have increased which is okay. 

Total Debt (Found on the Balance Sheet)

  • 2018: $1.9B
  • 2019: $8.3B
  • 2020: $8.9B
  • 2021: $9B
  • Total Debt has leveled off in 2021 which is a good sign.

Total Equity (Found on the Balance Sheet)

  • 2018: $15.3B
  • 2019: $16.8B
  • 2020: $20B
  • 2021: $21.7B
  • Total Equity has increased consistently. This is a good sign.

Is PayPal stock a good buy?

The big question we have to answer, is PayPal stock a good buy? Although PayPal’s financials could use some improvement, I have to emphasize the strength of the Meaning, Moat, and Management. We can check all three boxes. The various revenue streams and businesses under the PayPal umbrella make this one of the most scalable fintech stocks in the market. People have described PayPal as a super app and that’s no joke. It’s important to highlight that most of the companies under the PayPal umbrella do not have market penetration in 200 countries/territories which means there is clear room for growth. As more countries unlock the ability to use specific business segments, PayPal will see an increase in revenue.

If you’re looking for a tech company to invest in while it’s severely oversold, PayPal is a great choice.

This is a stock I will continue to buy.

The Summary, Score, and MOS of this stock may have changed since the posting of this review. Please login to Tykr to see up-to-date information.

If you found this stock review interesting, you may also like this review on Enphase.