This Is Why I Bought After Paypal Stock Dropped 70%

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One name I see more and more often in everyday life is PayPal (NASDAQ:PYPL). From online shopping to coffee shop signs, I see the name more than ever. Yet PayPal stock has fallen 70% in a year.

I think this is a bargain for my portfolio. I have bought some shares in the last few days. That’s why I’m excited by the possibilities.

strong business growth

One approach to investing is to pay attention to market trends that are individually spot, then examine businesses further. We’ve all heard people say that they wish they had invested in a company when they first started using a product that later became very popular.

PayPal is hardly new. But it seems to have gained more prominence to me over the past several years, partly as a result of the increase in online shopping during the pandemic. Looking at the figures, the revenue has more than doubled in the last five years. Meanwhile, earnings nearly tripled.

So not only is the business growing faster, earnings are growing faster than sales. This to me is a demonstration of the allure of the scalable business model used by the digital payments firm. This can help the company to increase its profit margin in future.

PayPal Stock Has Fallen

Despite this, PayPal stock has fallen 70% over the past year.

Clearly, not all investors have shared my enthusiasm for stocks lately. In part, I think this is due to investors losing enthusiasm for some of the “stay at home” stocks that soared during the pandemic. But even while allowing for it, PayPal has fallen through. It hasn’t traded at this year’s level since 2018, except for a brief period in the March 2020 stock market crash.

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Investors aren’t too excited with PayPal’s outlook. In the first quarter, net revenue growth of 7% was good, though not spectacular. But the decline in earnings per share was more worrying. They grew by more than half compared to the same quarter last year.

The company will announce its second quarter results this week. I expect the financial performance to show signs of improvement. I think concerns about it are the reason for the decline in PayPal shares.

why i bought

As a long-term investor, though quarterly earnings may be a useful data point for me, it should be viewed in a more complete context.

PayPal’s established base of customers and merchants gives it a huge business moat. It also has a strong brand. In those ways, I see it as similar to businesses like Visa and MasterCard. This has the potential to help the company generate huge profits for years if not decades to come. Putting PayPal stock in my portfolio now will help me reap rewards in the future.

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