PayPal Stock Analysis: Taming The Magic Card?

PayPal Stock Analysis: Explore the advantages of the email to email payment business model.
Business Model of PayPal. Even just at a glance, You can notice its business advantage

During Black Friday, the PayPal Buy Now Pay Later (BNPL) Program experienced a 400% surge from the previous year. Are these jumps could attract investors to hold or even buy its stock? Through Our PayPal Stock Analysis, we address that question.

In This Issue

Business Model: Cardless Payment.
The True Digital Wallet

Before going deeper into the BNPL program which is praised a lot by its own CEO, we need to know the business model of PayPal. The Payment Giant is well known for its inclusivity. When there is no Card, no Merchant Account, no place to meet, PayPal is there to facilitate the transaction.

To get clearer, imagine this situation.

Suppose you want to buy something online – and you have no credit card, no bank account that could facilitate that transaction at a reasonable cost. You always can count on PayPal. Visit its homepage, register your email, then, voila, you are ready to deliver money or buy something. What we like is the other party could only see your email account instead of your bank account, ID, or other important information that could harm you. (See Figure 1)

Oh, wait. Some readers may ask. If PayPal is so convenient – no credit card required, no visible Bank ID or other personal information. Why are Visa and MasterCard still the biggest dog in the payment market? With all those PayPal advantages, this is a tempting question. The answer lies in cost and network.

Fee and Cost

Visa and MasterCard have less cost compared to PayPal. The Credit Card Giant charges around 1% to 3% or an interchange fee while PayPal costs 2.9%.


Another challenge for PayPal is, sometimes, consumers can’t use it because simply the transaction or the merchant doesn’t accept PayPal. To say other words, Visa and MasterCard are tied with more networks than PayPal.

Investor Takeaway.

Even if PayPal can’t overtake The Card Company, in our opinion, it still provides a good investment opportunity due to :

  1. Safety. As a consequence of its email-to-email transaction nature, PayPal is considered one of the most secure payment platforms.
  2. Inclusivity. Everyone could have an email, unlike credit card. This also give PayPal opportunity to untap the market that The Card Network doesn’t play.
  3. Convenience (email to email visibility).

Battle Now, Lose Later
PayPal Stock Analysis by Identifying Management Promise.

PayPal’s biggest promise today is – of course – its Buy Now Pay Later program. The CEO Dan Schulman told to legendary Jim Cramer (sarcasm detected) that the BNPL Program is one of the brightest stars of the company, referring to its 400% leap in volume transaction and additional 1 million users from the previous year.

Given the fact that the Buy Now Pay Later is just launched a year ago. So, It is acceptable if Schulman is really excited about his new achievement. But, is it really that promising?

Breakdown The BNPL


In the third quarter of 2021, PayPal recorded 310 Billion transactions but only 5.48 Billion accounted for just 0.17%. So, we think that investors should not hype PayPal leap in the installment payment area (another word for Buy Now Pay Later). If Schulman sugarcoating the 400% leap, we encourage investors to see the other side: 0.17%.

Checking further, PayPal’s number is lagging behind the true BNPL provider like Affirm. The BNPL pure player has 2.5 Billion transactions in the same quarter. Meanwhile, Klarna has 20 Billion. PayPal’s number seems like a dwarf.

1. PayPal launched an installment payment option in the U.S. in late 2020.

Official Report

Officially, PayPal breakdown its revenue into two segments. Because it is boring, you could visit Figure 3 below to get detail.

PayPal Segment Contributions. In millions

Competitive Advantage.
PayPal Stock Analysis Through Exploring Economic Moat Durability.

In 2002, The e-commerce Giant (at that time) eBay acquired PayPal as its payment platform. Since then, The network effect of PayPal become stronger and stronger due to eBay’s massive connection.

After spinning off in 2014 from eBay, PayPal did not lose its touch and didn’t complacent with its previous achievement. As eBay has become past, PayPal needs to keep improving its network reach, something that is most important for the digital payment platform.

In 2021, The Calif-based company has integrated its BNPL program into its massive network (32 million merchants, 403 million active accounts). No new code required, no extra cost paid.

To Life Beyond Online Payment. Xoom. Venmo. Buy Later Again
PayPal Stock Analysis By Looking At Recent Development

As Visa and MasterCard vision to extend their life beyond the card by acquiring some company, PayPal also does the same. The acquisition of Venmo and Xoom shows that PayPal tries to capture the market beyond its former shelf. Venmo is a share payment platform. The acquisition of it gives PayPal access to family and friend transactions. In 2020, PayPal launch the Venmo credit card, making the step beyond online payments further.

Like Venmo, Xoom also payment for family and friends. Users can pay bills, send money with secure and cheap. In 2020, Xoom capabilities to send money directly into a Bank account or Debit card.

Point To Remember
Recap PayPal Stock Analysis

  1. Visa and MasterCard have a larger network than PayPal, but it doesn’t mean PayPal doesn’t have a chance. As we mention, PayPal is attractive (for users) due to its inclusivity and security.
  2. PayPal has a PE ratio of 44, above Visa with only 37. In our opinion, investors see PayPal has more growth potential which is linked with the e-commerce boom, especially for the world after pandemics. And it is unsurprising since the beginning of the company journey, PayPal has become the most popular online payment. The acquisition of Venmo and Xoom make that competitiveness become stronger.
  3. Investors should not hurry to join the hype with PayPal BNPL. We encourage investors to keep monitoring its contribution to revenue. Also, since it involves some debt, it means it risks. We need to examine closely the default rate.