Crypto still has everyone going crazy! Including the people over at PayPal. With a new feature out developing PayPal’s crypto foundation, it’s time to consider whether investing in the 20-year-old company is wise.
With PayPal’s volatile history and questions about what is a marketing tactic and what is a genuine feature that helps users, it’s time to look into the data behind the company before investing.
What is Paypal?
To really understand what’s going on, the basis for understanding the function of the company and new plans is essential.
What is PayPal? It is an online payment platform for individuals and businesses to transfer money to replace traditional payment methods.
On August 7, 2023, PayPal released its very own Stablecoin (PYUSD), showing its continued development as an online platform.
What is Stablecoin (PYUSD)? A cryptocurrency that is tied to the US dollar to avoid the volatility of typical cryptos (Bitcoin, Ethereum). PayPal has its stablecoin regulated by Paxos Trust Company LLC.
Why provide stablecoin? Reasons vary: To maintain a position as a strong competitor in e-commerce, tap further into the cryptocurrency world, provide more options for clients, and combat a changing market.
That info is all fine and dandy, and it’s good for a company to expand, but no one should invest just because a company is entering into more forms of crypto. The data matters, so let’s dive into it!
Using Equities Lab, I made a ticker for PayPal and tested it over a ten-year period. Below are the results! From 2013 all the way to about 2021, the payment transaction company was killing it! An explosive growth, but then a harsh downturn.
Looking at the Time graph below, PayPal beat the S&P 500 in 2015, 2016, 2017, 2018, and 2020 and then dropped off the face of the earth. Maybe it was a shifting market, crypto, or COVID-19, but something went wrong for the company.
What has PayPal reported to the SEC? Since the previous year, EPS has decreased by over 400%, over 2 million users have left the platform, and revenue growth has slowed dramatically. However, on the positive side, the number of paid transactions increased by over 500 million (500 million individual transactions), and net revenue has also increased.
Considering the quarterly report and the backtested history, the company has had quite an adventurous decade.
What factors impacted PayPal?
The dramatic up and down and the positive and negative information in the SEC report begs any potential investor to ask, what’s been happening in PayPal’s history? So, here it is!
- 2002: PayPal is bought by eBay, combining the two to make transactions easier.
- 2003-2014: PayPal purchases several other companies and continues to grow.
- 2015: PayPal and eBay split, and then it became a single publicly traded company but is still used for eBay payments.
- 2019: eBay made Adyen its primary processing partner, with PayPal still an option.
- 2020: COVID-19 increased e-commerce; both companies saw booming results in users.
- June 2021: eBay removes PayPal as an option for paying sellers to “improve customer experience.”
- July 2021: PayPal peaks in performance.
- March 2022: Fed starts raising rates, inflation happens, and e-commerce decreases.
- August 2023: PayPal has declined by more than 70% since its peak in 2021.
Why did eBay drop PayPal? eBay dropped PayPal to improve experience, lower costs, focus on other deals, maintain security, and provide better options for customers.
The split with eBay, combined with the decrease in e-commerce, a volatile market, and new competitors (Hi Apple Pay), has clearly impacted the trajectory of PayPal’s hopes and dreams.
Should You Invest?
PayPal did roll out a new form of transaction, but does a new feature mean you invest? No, having a new feature doesn’t mean you invest! Is stablecoin the future of e-commerce? Maybe. You might see headlines saying, “Crypto expansion is leading the way for the future, invest now!” but know that other companies are already using stablecoin (Circle, Tether, Binance USD, and TrueUSD).
What is certain? Since its peak in 2021, PayPal has struggled because a huge customer (eBay) dropped it, E-commerce performance is down, struggles with security, and new competitors are in the market. Although it may be branching into new business ventures, that doesn’t equal a safe long-term investment.
Double-check a stock before investing, and experience a better living through backtesting.