PayPal Holdings, Inc. (NASDAQ: PYPL) is following an innovation-driven growth model, with a focus on launching new platforms and forging new partnerships. The management is pursuing a strategic shift to reposition PayPal as a comprehensive commerce platform, expanding beyond its core identity as a payments company.
This week, the San Jose-headquartered payment solutions provider’s stock jumped after it launched an advertisement manager for small businesses. The rally ignited fresh momentum after several weeks of sideways trading. The underlying investor optimism reflects the company’s pivot toward a strategy of profitable growth and margin expansion. The strong network effect of the company’s merchant-consumer platform gives it an edge over competitors.
Investing in PYPL
PYPL has grown about 33% in the past six months, slightly lower than the 35% gain the S&P 500 index has recorded during that period. The last closing price is sharply below the stock’s all-time high of July 2021. Meanwhile, the company’s impressive $444-billion payment volume indicates that consumer and merchant engagement remains strong, despite the recent slowdown in e-commerce growth due to macro headwinds. That, combined with the relatively low valuation, presents a compelling investment opportunity.
In the second quarter of fiscal 2025, PayPal’s revenues increased 5% year-over-year to $8.3 billion on a reported basis, and 5% on a currency-neutral basis, beating estimates. As a result, adjusted earnings climbed 18% annually to $1.40 per share in Q2. Quarterly earnings have consistently beaten estimates for over three years. On an unadjusted basis, net income was $1.26 billion, up 12% year-over-year. Earnings per share jumped 20% from last year to $1.29.
Outlook
The management said it expects third-quarter adjusted earnings to be in the range of $1.18 per share to $1.22 per share, and unadjusted earnings per share to be between $1.14 and $1.18. The Q3 earnings report is scheduled for release on October 28, before the opening bell. The company raised its full-year earnings per share guidance to the $5.15-5.30 range, excluding one-off items, from its previous forecast of $4.95-5.10 per share. The guidance for full-year unadjusted earnings per share is $4.90-5.05.
PayPal’s CEO, Alex Chriss, said in his post-earnings interaction with analysts, “With PayPal’s unmatched scale and trusted brands, our strategy is laser-focused on anticipating and fulfilling what customers need today and what they’ll expect tomorrow, whether they’re buying online, in-store, or through AI agents. Our execution is fast and focused. We are strengthening PayPal’s value proposition to bring in new customers, increase engagement, and create strong partnerships with merchants.”
New Platforms
PayPal is on the path to a major transformation – evolving from a payments company to a dynamic commerce platform. It targets to bring a significant change in the way customers shop in the next five years, bigger than in the past two decades combined. Recently, the company unveiled an Ad management platform for small businesses. The PayPal Ads Manager allows small businesses to become their own retail media networks and generate new revenue streams. Last month, the company entered into a multi-year partnership with Google to deliver a seamless digital commerce experience to customers through innovative solutions.
The average price of PayPal’s stock for the last 52 weeks is $75.03. The shares were trading up 2.2% on Wednesday afternoon, extending the uptrend seen since the beginning of the week.
The post PayPal’s big pivot from payments to commerce. Is the stock a buy? first appeared on AlphaStreet.
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