Why PayPal’s Surging Volume Isn’t Lifting the Stock
PayPal’s Growing Business But Struggling Stock: What’s Going On?
Key Points at a Glance
- Payment volume is up: PayPal processed $486 billion in payments last quarter — that’s 10% more than last year
- The stock is down: Despite the growth, shares have fallen 81% from their 2021 peak
- The weak spot: PayPal’s most profitable service — "branded checkout" — is barely growing (only 2% last quarter)
- Big competition: Apple Pay (with ~900 million users) is stealing the spotlight
- Profit pressure: Transaction profits barely moved (+1%) because the high-margin segment is struggling
What Is PayPal and How Big Is It?
Think of PayPal as a digital wallet that lets people and businesses send and receive money online. It’s been around for over 20 years and has built a massive network:
| Metric | Number |
|---|---|
| Monthly active users | 228 million |
| Expected revenue (2026) | $34.7 billion |
| Expected free cash flow (2026) | $6 billion |
| Years in business | 20+ |
Simple explanation: Free cash flow is the real cash a company generates after paying for everything it needs to run and grow — like money left in your pocket after all bills are paid.
The Good News: Payment Volume Keeps Growing
The most important scorecard for PayPal is Total Payment Volume (TPV) — the total dollar value of all payments flowing through its system.
- Q2 2026 TPV: $486 billion
- Year-over-year growth: +10%
- Trend: This number has risen every single year
Breakdown by service:
- Venmo (peer-to-peer payments): TPV up 14%
- Braintree (helps merchants accept payments): TPV up 13%
- Overall revenue: Only up 5% — much slower than payment volume
Important Callout: Revenue growing slower than payment volume means PayPal is making less money per dollar of transactions. That’s a yellow flag.
The Bad News: The Stock Has Crashed
Despite processing more money than ever, investors are unhappy:
- Stock down 81% from its 2021 high (as of August 2026)
- Trading at a "beaten-down valuation" — Wall Street isn’t excited
- Motley Fool Stock Advisor (a popular picking service) did NOT include PayPal in its "10 best stocks to buy now"
ELI5 Analogy: Imagine a lemonade stand selling more cups than ever, but the owner’s share of profits shrinks — and neighbors stop wanting to buy a piece of the business. That’s PayPal right now.
The Main Problem: Branded Checkout Is Slowing Down
What Is "Branded Checkout"?
When you shop online and see a "Pay with PayPal" button — that’s branded checkout. It includes:
- PayPal-branded checkout
- "Pay with Venmo" button
- eBay payments (eBay used to own PayPal)
Why It Matters
- Most profitable segment — the "crown jewel"
- Highest margins — makes the most profit per transaction
- 28% of total TPV — still a huge chunk of the business
The Growth Collapse
| Period | Branded Checkout TPV Growth |
|---|---|
| 2018–2021 (avg/year) | +26% |
| 2022 | +5% |
| Q2 2026 | +2% |
Simple explanation: Transaction margin dollars = profit from processing payments. These only grew 1% last quarter — because the high-profit branded checkout is stuck in neutral.
Why Branded Checkout Matters So Much
It’s the easiest, most trusted way to pay online.
- Customer clicks "Pay with PayPal"
- Logs in once (no typing card numbers or addresses)
- Done in seconds
This convenience made PayPal the default for years. But now…
The Competition: Apple Pay Is a Big Threat
| Player | Estimated Global Users | Advantage |
|---|---|---|
| Apple Pay | ~900 million | Built into every iPhone, iPad, Mac, Watch |
| PayPal | 228 million monthly active | Works everywhere, but extra step to log in |
Why Apple Pay wins sometimes:
- Already on your phone — no app to open
- Face ID / Touch ID — instant, secure
- Works in stores AND online — one system for everything
The core problem: When Apple Pay is right there at checkout, many iPhone users just use that instead of clicking the PayPal button.
What Management Says vs. What the Market Thinks
CEO Enrique Lores (Q2 2026 earnings call):
"We’re raising our expectation for online branded checkout to the low-single-digit range for the year."
Translation: "We think it’ll grow 1–3% for the full year."
The Market’s Reaction:
- Not impressed — low-single-digit growth won’t excite investors
- Stock stays cheap — valuation reflects low expectations
- Big question: Can branded checkout ever return to strong growth?
Should You Buy PayPal Stock Right Now?
The Bull Case (Reasons to Be Hopeful)
Huge, sticky user base (228M)
Massive payment volume ($486B/quarter and growing)
Strong cash generation ($6B free cash flow expected)
Venmo and Braintree growing fast (13–14%)
Stock price already assumes the worst
The Bear Case (Reasons to Worry)
Core profit engine (branded checkout) fading
Apple Pay dominance on iPhones (huge market)
Revenue growing slower than volume (margin pressure)
No clear catalyst to re-accelerate the best segment
Even management only guides "low-single-digit" growth
Expert Take (Motley Fool):
PayPal was NOT in the "10 Best Stocks to Buy Now" list.
For context: Netflix (2004 pick) → $1,000 became $421,943. Nvidia (2005 pick) → $1,000 became $1,382,819.
Summary
| What’s Working | What’s Broken |
|---|---|
| Total payment volume +10% YoY | Branded checkout +2% YoY (28% of TPV) |
| Venmo TPV +14% | Transaction margin dollars +1% |
| Braintree TPV +13% | Stock -81% from peak |
| $6B free cash flow expected | Not on "best stocks" lists |
| 228M active users | Apple Pay eating lunch |
Bottom line: PayPal is a real, profitable business processing half a trillion dollars per quarter. But its most profitable engine is sputtering, and competition is fierce. Until branded checkout shows life, the stock may stay stuck.
FAQ
1. What does "TPV" mean and why does it matter?
TPV = Total Payment Volume — the total dollar value of all payments processed. It matters because it shows how much activity runs through PayPal’s rails. Higher TPV usually means more revenue — but not always, as we’re seeing now.
2. Why is branded checkout more profitable than Venmo or Braintree?
Branded checkout charges merchants a higher fee per transaction because it brings trusted, ready-to-buy customers who convert better. Venmo (P2P) and Braintree (backend plumbing) operate on thinner margins.
3. Can PayPal fix the branded checkout slowdown?
Maybe. They could:
- Add new incentives for merchants to keep the PayPal button prominent
- Integrate more loyalty/rewards
- Expand "Pay Later" (buy now, pay later) options
But with Apple Pay built into every iPhone, the structural challenge is real.
4. Is the stock cheap for a reason?
Yes. Valuation is low because growth expectations are low. The market prices stocks based on future growth, not just current size. If branded checkout stays stuck at 2%, the "cheap" stock may stay cheap.
5. Should a beginner investor buy PayPal now?
Only if you:
- Believe branded checkout can re-accelerate (contrarian bet)
- Want a cash-generating giant at a depressed price
- Can hold for 3–5+ years through volatility
Otherwise: There are clearer growth stories with less "main engine broken" risk.
Disclosure: The original article’s author (Neil Patel) has no position in PayPal. The Motley Fool holds positions in Apple, PayPal, and eBay, and recommends short September 2026 $47.50 calls on PayPal. This summary is for educational purposes only — not investment advice.