Is PayPal (PYPL) stock a good buy?

Is PayPal (PYPL) stock a good buy?

➡️ This is a step-by-step stock review to determine if PayPal (PYPL) stock is a good buy. In this article, we’ll help you complete a 4M checklist. The 4Ms include the MOS (Margin of Safety), Meaning, Moat, and Management.

Table of Contents

  1. PayPal Company History
  2. MOS
  3. Meaning
  4. Moat
  5. Management
  6. News
  7. 4M Summary
  8. Is PayPal stock a good buy?

1. PayPal Company History

➡️ Goal: It’s important to know the company’s history. This helps us understand the various revenue streams, if they acquired other companies, how they grew through difficult times, and how they separated themselves from the competition.

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.

2. MOS (Margin of Safety)

➡️ Goal: When you look at a stock, the first step is to look at the financials. Fortunately, Tykr does this step for us automatically. A stock is either classified On Sale (Potential Buy), Watch (Hold), or Overpriced (Potential Sell). The higher the score, the stronger the financials and the safer the investment. The higher the MOS, the higher the potential returns you can make. To determine if a stock is a definitive “Buy” or “Sell”, it’s wise to complete a 4M checklist. 

  • Summary:  Overpriced
  • Score:  44/100
  • MOS:  0%
  • Share Price:  $65
  • Sticker Price:  $80

3. Meaning

How does PayPal make money?

➡️ Goal: It’s important to know how a company makes money. A mature business model has multiple streams of revenue which allow the company to weather downturns in the economy.

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. 

4. Moat

➡️ Goal: It’s important to understand who the competitors are and how their financials rank against this company. Try to find 5 other competitors to rank against based on Score. The best way to find competitors is to Google “XYZ competition” and replace XYZ with the company name. You can also go to Tykr and click on the “Similar Stocks” tab on each stock to see similar companies in the same industry.

PayPal (PYPL)

  • Summary: Overpriced
  • Score:  44/100
  • MOS:  0%
  • Share Price:  $65
  • Sticker Price:  $80
  • Available in 200 countries and territories
  • Revenue: $27.5B

Block (SQ)

  • Score:  50/100
  • MOS:  0%
  • Share Price:  $59
  • Sticker Price:  $76
  • Available in 9 countries
  • Revenue: $17.5B

Adyen (ADYEN)

  • Score:  72/100
  • MOS:  90%
  • Share Price:  €1,415
  • Sticker Price:  €7,112
  • Available in 62 countries
  • Revenue: $8.9B

Mastercard (MA)

  • Score:  72/100
  • MOS:  0%
  • Share Price:  $385
  • Sticker Price:  $371
  • Available in 210 countries and territories
  • Revenue: $22.2B

Visa (V)

  • Score:  67/100
  • MOS:  0%
  • Share Price:  $233
  • Sticker Price:  $372
  • Available in 200 countries and territories
  • Revenue: $29.3B

American Express (AXP)

  • Score:  72/100
  • MOS:  0%
  • Share Price:  $153
  • Sticker Price:  $181
  • Available in 200 countries and territories
  • Revenue: $52.8B

Ranking based on Score

  • Adyen – 72/100
  • Mastercard – 72/100
  • American Express – 72/100
  • Visa – 67/100
  • Block – 50/100
  • PayPal – 44/100

5. Management

➡️ Goal: It’s important to understand who the CEO is, what they have accomplished in the past, and how they have helped this company grow. As investors, we should invest in CEOs with humility and integrity. Good leaders typically have stronger cultures, less turnover, better returns in the stock market.

Dan Schulman is the current President and CEO of PayPal. In this article from, he states that his father was one of his biggest influences as he taught him the value of humility and listening. One of the most important things his father told him was “You aren’t what you say you are, you are what you do – be as authentic as you can.”

This article from states that Schulman started with humble beginners as CEO. He drove truck after getting rejected from multiple colleges. He then landed a job as an assistant account executive at New Jersey Bell, while attending night school at New York University. He climbed the ranks at New Jersey Bell/AT&T 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 3.9 and Schulman has a CEO approval of 79%. In February of 2023, Schulman announced he would be stepping down at the end of 2023 but will continue to serve on the board of directors. In summary, PayPal’s revenues tripled, and active accounts have doubled since he’s taken the reigns as CEO. The question is, who will replace Schulman as CEO.

6. News

➡️ Goal: It’s important to highlight important company-specific news as well as industry-specific news over the last month and year. We don’t need daily news on a company to make buy or sell decisions because we’re investors, not traders. Overall, we want sufficient news to understand where a company and industry are heading over the next year or few years. 

This article from states that PayPal experienced impressive growth during the pandemic due to the increase in e-commerce sales. Since Covid-19 has subsided, consumers have gone back to shopping in person with not just credit cards but cash.

This article from states that PayPal beat expectations on both earnings and revenue. EPS expected was $1.11 and reported was $1.17. Quarterly revenue expected was $6.99B and reported was $7.04B. 

The big question is, why did PayPal’s share price fall about 10% even though the company beat EPS and Revenue expectations? This video from CNBC states that the profit margin outlook is expected to be lower than expected. Keep in mind, this is an outlook which essentially means a prediction. 

This article from states that PayPal CEO Dan Schulman scooped up nearly $2M in stock back in February of 2023. When a CEO is buying shares of their own company, this is a great sign for investors.

This article from talks about four ways PayPal plans on using AI.

  1. Predict issuer declines – PayPal will analyze issuer decline ratios, patterns, approvals, and decline history on different days and at different times.
  2. Remedy declined transactions – PayPal will prompt users to try different payment methods, supply another form of authentication like a CVV, or add funds to their account.
  3. Design effective retry strategies – When a payment declines, it’s important to clearly explain to the consumer WHY a decline happened and the exact next steps they can take to make a successful payment. A lot of e-commerce platforms fail at this. They tell the customer the payment failed but don’t provide a clear path forward.
  4. Detect fraud in real-time – PayPal will identify red-flag patterns and help protect PayPal, its business customers, and consumers.

7. 4M Summary

➡️ Goal: All of our homework on this company leads up to the 4M checklist. A lot of investors only look at the numbers. Yes, it’s important to look at the first M (MOS) which is the math part of investing but it’s also important to look past the numbers and also look at the business, the competition, and the management. If all 4Ms pass, we should have high confidence in buying this stock.

❌ MOS: The financials are not great. The score of 44/100 and MOS of 0% give us the impression this stock is taking a nose dive. Although the financials are not what we want to see, this doesn’t mean we should give up.

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. 

Moat: Payment tech is a fast-growing industry but PayPal still has one of the largest footprints on the planet. Adyen and Block are still far behind and the private company, Stripe, is only in 46 countries. Although Visa, Mastercard, and American Express are listed as competitors, they are also strategic partners because PayPal accepts payments with Visa, Mastercard, and American Express. Although payment tech is becoming more saturated, as the world population continues to grow, all competitors can thrive.

Management: Dan Schulman has done a great job leading PayPal the last 9 years but its time for a new CEO to step in. 

8. Is PayPal stock a good buy?

Although PayPal’s financials are not the best at this given moment, 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. 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. It’s almost important to highlight the PayPal will leverage the power of AI to help is business customers and consumers customers. When PayPal announces a new CEO, especially a CEO with e-commerce experience, we can expect the share price to increase on that positive announcement alone.

I will still continue buying shares of PayPal as I have confidence this stock will switch back to On Sale after a few consistent quarters of beating EPS expectations. 

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 Paycom.