Is PayPal losing its grip? Competitors are advancing, and investors are selling shares

A slowdown in PayPal’s branded payments growth points to intensifying competition. Investors are selling the company’s shares, and there is little left to support the stock but the prospect of a buyback.

PayPal Holdings, Inc.’s (NASDAQ: PYPL) Q4 2024 report showed a deceleration in branded transaction growth and pressure on commission-based revenue, which drove the share price lower. Market participants had hoped PayPal’s management would provide a more optimistic outlook for 2025 at the Investor Day on 25 February, but no such breakthrough occurred. Market attention now turns to the Q2 2025 report, due in late April, in the hope that that key indicators will improve; until then, the stock remains under pressure.

This article examines PayPal Holdings, outlines its revenue streams, reviews its Q4 2024 performance, and analyses expectations for Q1 2025. In addition, it provides a technical analysis of PYPL stock, forming the basis for the PayPal stock forecast for 2025.

About PayPal Holdings, Inc.

PayPal Holdings, Inc. was founded in December 1998 by Max Levchin, Peter Thiel, and Luke Nosek as Confinity. The company initially developed security software for hand-held devices but later shifted its focus to digital payments. In 2000, Confinity merged with X.com, an online banking company founded by Elon Musk, and was renamed PayPal in 2001.

Today’s PayPal Holdings offers online payment solutions, enabling individuals and businesses to send and receive money worldwide. Its services include digital wallets, payment processing for merchants, user-to-user transfers, and fintech solutions.

On 15 February 2002, PayPal went public on the NASDAQ under the PYPL ticker. Later that year, the company was acquired by eBay and became its primary payment service. In 2015, PayPal became independent again and resumed trading under the same ticker, PYPL.

PayPal Holdings, Inc.’s main revenue sources

PayPal’s revenue comes from a variety of sources, mainly related to digital payments. The primary revenue streams are divided into subcategories and outlined below:

• Transaction revenue:
  • Transaction fees for merchants: PayPal charges merchants a fee for each transaction processed on the platform, typically a percentage of the transaction amount plus a flat fee. These commissions apply to payments for goods and services
  • Transaction fees for consumers: PayPal charges a fee for some consumer operations, such as instant transfers from a PayPal or Venmo account to a bank account or a debit card
  • International transaction fees: for international transfers, PayPal adds extra fees, typically as a percentage of the transaction amount plus currency conversion fees, if applicable
  • Cryptocurrency transaction fees: PayPal charges fees for buying, selling, or transferring cryptocurrencies through its platform. These vary depending on the transaction amount

• Revenue from additional services:
  • Interest on loans and loan products: PayPal provides financing, such as PayPal Working Capital and PayPal Business Loans for merchants, and consumer loans in some markets. The company earns interest and fees on these loans, with annual interest rates ranging from 15% to 30%
  • Interest on customer account balances: funds held in PayPal accounts are placed in liquid investments or interest-bearing accounts, generating revenue for PayPal that is not shared with account holders
  • Subscription fees: PayPal charges merchants for premium features such as PayPal Payments Pro, which provides broader payment processing tools, or Payflow Pro for customisable payment gateways
  • Partner and referral fees: PayPal generates revenue through partnerships with companies such as Visa, Mastercard, and e-commerce platforms, as well as referral fees from cashback programs and partner services
  • Gateway fees: through services like Payflow, PayPal charges fees for integrating payment gateways, including transaction fees and additional services like fraud protection
• Revenue from subsidiaries:
  • Venmo: generates income through fees for instant transfers, credit card payments, and merchant transactions via Venmo’s payment acceptance features
  • Braintree: this payment processing platform charges merchants transaction processing fees, often tailored to larger enterprises, contributing to PayPal’s overall revenue
  • Xoom: this international money transfer service generates revenue from transfer fees and currency exchange margins on international transfers
• Other revenue sources include:
  • Card reader sales and fees: services such as PayPal Here and Zettle provide mobile card readers for offline payments, bringing in revenue from device sales and transaction fees
  • Interchange fees: in some cases, PayPal receives a share of interchange fees when users make payments with linked debit or credit cards through partnerships with card networks
• Cryptocurrency-related services: in addition to transaction fees, PayPal may generate additional revenue from cryptocurrency storage or related services as it expands its digital assets offerings

PayPal’s revenue primarily comes from the sources listed above, with transaction fees making up the bulk of revenue, supported by income from additional services and subsidiaries. This diversified model supports PayPal’s operations in over 200 markets and serves millions of active accounts.

PayPal Holdings, Inc. Q4 2024 report

On 4 February 2025, PayPal Holdings released its Q4 2024 report. The key highlights are as follows:

• Revenue: 8.36 billion USD (+4%)
• Net income: 1.21 billion USD (-2%)
• Earnings per share: 1.19 USD (+5%)
• Operating profit: 1.5 billion USD (+2%)

Account and activity metrics:

• Active accounts: 434 (+2%)
• Monthly active accounts: 229 (+2%)
• Number of payment transactions: 6.62 (-3%)
• Transactions per active account: 60.60 (+3)
• TPA ex. PSP (unbranded card processing): 34.90 (+4%)

CEO Alex Chriss stated that PayPal ended 2024 on a strong note, with results that exceeded expectations. He noted that throughout 2024, the company focused on improving execution and repositioning the business, laying a solid foundation for long-term profitable growth. Chriss highlighted specific improvements in branded payments, P2P services and Venmo, as well as progress in its price-to-value strategy, which was beginning to show positive results.

For Q1 2025, PayPal forecasts EPS of between 1.15 and 1.17 USD, up from 1.08 USD for the corresponding period last year. For the full year 2025, the company expects adjusted EPS to range from 4.95 USD to 5.10 USD, compared to 4.65 USD last year.

At its Investor Day in February 2025, PayPal introduced a new unified platform for merchants, PayPal Open, and announced a partnership with Verifone and its plans for the international expansion of its fast payment service, Fastlane. The company also reiterated its financial targets for 2025 and expressed optimism about future growth.

Investors reacted negatively to PayPal’s Q4 2024 report, sending its shares down by 11% despite better-than-expected income and revenue. The main reason for the decline was a slowdown in branded transactions, raising concerns that users were switching to competitors such as Apple Pay and Google Pay. Investor scepticism was further intensified by additional pressure on commission revenue and uncertainty about whether new initiatives like PayPal Open and Fastlane could drive substantial growth in the future. Elevated market expectations also played a role, as investors expected a faster acceleration in growth.

PayPal Holdings, Inc.’s stock buyback program

PayPal Holdings, Inc. announced a new stock buyback program in its Q4 2024 report, released on 4 February 2025. The company’s Board of Directors approved a 15 billion USD share repurchase plan, reflecting confidence in PayPal’s long-term value and its commitment to returning capital to shareholders.

This new program builds on the company’s current capital allocation strategy, following significant share repurchase activity in 2024. Over the full year of 2024, PayPal bought back approximately 75 million shares, returning 6.0 billion USD to shareholders.

The new 15 billion USD program replaces all previous initiatives and provides PayPal with the flexibility to reduce the number of outstanding shares further, potentially boosting EPS over time by concentrating ownership among the remaining shareholders.

CEO Alex Chriss and CFO Jamie Miller emphasised that the program reflects PayPal’s strong financial position and the undervaluation of its stock, which ended 2024 at levels they believe do not fully reflect the company’s growth potential, particularly in high-margin segments such as branded payments and Venmo.

With no fixed completion date set, buybacks are expected to be executed depending on market conditions, share price, and the company’s liquidity needs.

Expert forecasts for PayPal Holdings, Inc. stock

• Barchart: out of 42 analysts, 17 rated PayPal Holdings stock as a Strong Buy, two as a Moderate Buy, 22 as a Hold, and one as a Strong Sell. The highest price target is 125 USD, and the lowest is 70 USD
• MarketBeat: among 36 specialists, 21 issued a Buy recommendation, while 15 advised Hold. The high price target is 117 USD, and the low target is 65 USD
• TipRanks: of 31 respondents, 17 gave a Buy rating and 14 recommended Hold. The maximum target price is 120 USD, and the minimum is 70 USD
• Stock Analysis: out of 32 experts, seven rated the stock as a Strong Buy, 12 as a Buy, and 13 as a Hold. The highest forecast is 125 USD, and the lowest is 70 USD.

PayPal Holdings, Inc. stock price forecast for 2025

The coronavirus pandemic marked the most successful period for PayPal, as surging demand for online payments allowed the company to more than double its income, with its shares soaring by 230%. However, sustaining such rapid growth proved challenging, especially with increasing competition from new market entrants. As a result, in Q2 2022, PayPal reported a 340 million USD loss, causing its stock to plummet by 80%. Since then, starting in 2022, the company’s stock has been trading around 80 USD, with a resistance level at 100 USD and support at 50 USD. Investor interest in PayPal has since declined. Based on PayPal’s stock performance, the following scenarios are possible for 2025:

The primary forecast for PayPal stock suggests a rebound from the trendline, with the price rising to the 100 USD resistance level. A breakout above this resistance may trigger further growth to 120 USD. A stronger-than-expected Q1 2025 earnings report, combined with the ongoing stock buyback program, could serve as catalysts for a price increase.

The alternative forecast for PayPal stock predicts a test of the 50 USD support level, indicating a potential further decline of 25%. Subsequently, the price is expected to rebound from this support and rise again towards the 100 USD resistance level.

Risks of investing in PayPal Holdings, Inc.

When investing in PayPal Holdings stock, it is essential to consider the factors that could negatively affect the company’s future revenues. The primary risks are outlined below:

• Slowing growth in branded transactions: investors are disappointed by weaker-than-expected growth in PayPal’s branded transactions. Underperformance in this area could point to a decline in user engagement with PayPal’s core services
• Increased competition: intensified competition from players like Apple Pay, Google Pay, Stripe, and other fintech companies could reduce PayPal’s market share. Competitors offering lower fees or better interaction with e-commerce platforms may attract PayPal’s customers
• Macroeconomic uncertainty: economic downturns or recessions may reduce consumer spending, directly affecting transaction volumes. Elevated interest rates might increase borrowing costs and diminish consumer confidence, limiting the growth of payment operations
• Lower transaction fees: PayPal’s revenue relies heavily on fees charged per transaction. If merchants negotiate lower fees and switch to alternative payment methods, PayPal’s revenue growth could slow
• Stock volatility and market expectations: despite strong financial results, PayPal’s stock fell following the Q4 earnings release, indicating the market’s sensitivity to expectations. If the company fails to meet growth expectations, investor confidence will continue to wane

Summary

PayPal’s Q4 2024 report highlights that the company is facing a challenging situation, grappling with increased competition and pressure on key business indicators. Despite promising initiatives like PayPal Open and Fastlane, there remains uncertainty about their ability to generate sustained growth in the near term. The ambitious plans announced during Investor Day demonstrate a clear intention to reposition PayPal as a broader ecosystem, leveraging its vast user base and technological infrastructure to master new opportunities, such as one-click payments.

If it can effectively execute its initiatives, PayPal has a genuine chance to resume substantial growth, particularly by making branded payments popular again and stabilising margins. However, the absence of immediate catalysts and the highly competitive landscape present considerable risks. The Q1 2025 report will be a pivotal moment to prove that this shift is gaining momentum.