Could PayPal Stock Help You Retire a Millionaire?


PayPal (NASDAQ: PYPL) was spun off from eBay back in July 2015, and its investors received one share of PayPal for every share of eBay they owned. PayPal’s new shares started trading at $41.63, and they eventually rallied to an all-time high of $308.53 during the apex of the growth stock rally in July 2021.

But today, PayPal’s stock trades at around $60. Therefore, a $10,000 investment in PayPal on its first trading day would have briefly grown to more than $74,000 before shrinking back to about $14,000 today. That same investment in an S&P 500 index fund would have grown to more than $16,000 after including its reinvested dividends.

Let’s see why PayPal underperformed the market, and if it could still turn a fresh $10,000 investment into more than $1 million over the next 20 years.

Image source: Getty Images.

When a growth stock stops growing

When PayPal was spun off, the bulls believed it could continue growing on its own as it gained more customers and profited from the expansion of the digital payments market. PayPal’s initial growth supported that bullish view.

From 2015 to 2022, PayPal’s annual revenue grew from $9.2 billion to $27.5 billion, representing a compound annual growth rate (CAGR) of 17%. Its growth also accelerated during the pandemic as more people made digital payments. But as this table illustrates, its growth decelerated significantly in 2021 and 2022.







Revenue growth






Active accounts growth






Total payment volume growth






Adjusted EPS growth






Data source: PayPal. Table by author.

That slowdown was caused by three headwinds. First, eBay replaced PayPal with smaller Dutch rival Adyen as its preferred payment platform in a three-year transition from 2018 to 2021. Second, aggressive competitors like Block‘s Square and Cash App, Apple Pay, and Alphabet‘s Google Pay crept into its backyard. Lastly, inflation, rising interest rates, geopolitical conflicts, and other macro headwinds broadly curbed consumer spending throughout 2022 and most of 2023.

PayPal’s revenue rose 8% year over year in the first nine months of 2023 as those headwinds persisted, and its total number of active accounts dipped 1% to 428 million at the end of the third quarter. Analysts expect its revenue to rise 8% for the full year and grow at as CAGR of 9% from 2023 to 2025. The company is still growing, but those estimates suggest PayPal’s halcyon days of double-digit sales growth are over.

What are PayPal’s plans for the future?

Last year, PayPal hired a new CEO, Intuit‘s Alex Chriss, after longtime CEO Dan Schulman stepped down. Under Chriss, PayPal plans to continue expanding its Venmo app for peer-to-peer payments, its buy now, pay later (BNPL) services, and its Cashback cards. The company also aims to provide more mobile and web payment services through its Braintree subsidiary, and believes it can leverage accumulated customer data to help its merchants create more personalized shopping experiences.

But over the long term, it’s still unclear if PayPal has room to grow in an increasingly crowded market. Apple and Google enable customers to make purchases directly through their first-party services, e-commerce companies like Shopify are expanding their own integrated payment platforms, and Adyen is gaining ground with its backend payments software — which is more flexible and customizable and less restrictive than PayPal’s Braintree platform.

PayPal’s gradual loss of active accounts suggests the company lacks a meaningful moat against those existential threats, and could be forced to gradually raise fees or launch intrusive new features to squeeze more revenue from its current customers and merchants. However, those strategies could backfire and make PayPal less attractive.

On the bright side, PayPal has been aggressively cutting costs and buying back shares to boost its earnings per share (EPS). Analysts expect its EPS to rise 77% in 2023 and grow at a CAGR of 23% from 2023 to 2025. Its stock also looks historically cheap at just 15 times forward earnings.

How much could PayPal be worth in 20 years?

Assuming PayPal’s valuations hold steady, the company likely would need to grow its EPS at a CAGR of 26% over the next 20 years to turn a $10,000 investment into $1 million.

I don’t think that will happen as PayPal’s growth cools and the digital payments market matures. According to Markets and Markets, the global digital payment market could grow at a CAGR of 12% from 2023 to 2028 — which is a decent growth rate, but well below the threshold for generating millionaire-making gains.

PayPal’s downside might be limited at these prices, but investors shouldn’t expect the company to become a great growth stock unless it disrupts the digital payments industry again.

Should you invest $1,000 in PayPal right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Adyen and Apple. The Motley Fool has positions in and recommends Adyen, Alphabet, Apple, Block, Intuit, PayPal, and Shopify. The Motley Fool recommends eBay. The Motley Fool has a disclosure policy.

Could PayPal Stock Help You Retire a Millionaire? was originally published by The Motley Fool